The prevalence of illegal loan sharks in the UK is being addressed by a government initiative to identify and prosecute illegal money lenders. Loan sharks are generally associated with other forms of criminal activity and prey on those living in the worst areas of financial deprivation. High rise council estates and pockets within communities where living on benefits is normal attract predatory lenders. They know that their customers will have no other viable lending options as are too high risk to qualify.
Loan sharks operate by lending money without a licence to do so. Typically no paperwork is given and extortionate rates of interest are applied. When it comes time to collect on these debts intimidation and violence are used. Debtors are told they are likely to go to prison if they fail to pay which is not the case as there is no legal obligation to repay a debt issued by an illegal lender.
Trading standards have launched a number of illegal money lending teams, an initiative backed by OFT. They are using national TV and radio to advertise, plus using a leaflet and poster campaign. There is also a government loan shark team which can be contacted through a hotline number. Those who fall prey to predatory money lenders are urged to turn in the sharks who are threatening them, and advertisements attempt to clarify that it is not illegal to actually borrow from loan sharks to urge witnesses to come forward.
Illiteracy and financial irresponsibility are often traits of those using loan sharks. The government urges them to shop round for licensed lenders, which presumes a level of fiscal awareness that is not likely to be there. There is usually a high level of worklessness as opposed to unemployment. Those who fall for these practices are often only concerned in getting hold of quick money and don’t ask to see paperwork or discuss interest rates, and only realise the position they have put themselves in when they end up owing what they borrowed many times over due to compounded interest.
Often those who borrow from loan sharks turn to criminal activity themselves to repay the debt, resorting to burglary, prostitution, and theft. The loan sharks themselves are often embroiled in nefarious activities such as handling stolen goods, selling illegal drugs and cigarettes, and money laundering. It could well be the case that the actual initiative to stop illegal loan shark activity is prompted more by an effort to apprehend criminals rather than concern for those who are caught in the debt trap.
There have been a number of arrests made already through the ‘Stop Loan Sharks’ initiative`. It cannot but give rise to the question of how those who use their services will obtain any funds at all if loan sharks, which are already illegal, cease to conduct business. Inevitably it will lead to more criminal activity by some of those already dependent on loan sharks.