Loan shark crackdown: Treasury is homing in on illegal and often dangerous moneylending

They sound like something from a Dickens novel, and a long way from the well lit, tangible, regulated world of the high street credit card or personal loan.

But loan sharks, aptly named for their pursuit of the financially struggling, are a very modern problem. At least 300,000 households are in deep with these lenders, according to official assessments, with one famous case citing the repayment of £88,000 for an original loan of just £500.

The 40-year-old woman, who took the debt just before Christmas in 2000, spent several years attempting to repay the loan at a rate of several thousand pounds each month. She suffered two strokes and a brain haemorrhage during that time, before contacting the police who launched a successful prosecution against the loan shark involved.

These individuals operate in the shadows – often presenting themselves as friends of friends – leaving little or no paper trail. They regularly resort to intimidation or violence if payments are not made on debts that they may refuse to settle or continue to add to indiscriminately, without warning or mutual agreement.

With some investigations suggesting charges of 719,000 per cent on loans from such criminals – yes, that is the right number of zeroes – the chances are that, much like a weakened fish, their “customers” will do well to ever escape their clutches.

Anyone being pursued by loan sharks, whatever the circumstances, is urged to report it. There are alternatives for those with a poor credit history and/or a low income.

“Loan sharks are a blight on society and prey on vulnerable people who struggle to make ends meet,” Tony Quigley, head of the England Illegal Money Lending Team (IMLT), says. “These criminals use callous methods to enforce repayment and victims are often subjected to threats, intimidation and violence. We will not tolerate this sort of criminal activity in our country and loan sharks who are caught flouting the law will be pursued and prosecuted.”

This week sees a fresh crackdown on such “lowlife crooks”, with more funding to tackle unlawful lending, and an increase in the amount of money seized from loan sharks to support those most vulnerable to their nasty tactics.

More than £5.5m has been earmarked to fund the fight against loan sharks, adding to funds allocated to Britain’s IMLT and similar bodies in Northern Ireland to investigate and prosecute illegal lenders, and support their victims. Scotland and Wales have comparable teams.

Meanwhile, £100,000 of money already seized from loan sharks will also be spent to encourage people in England at risk of being targeted by loan sharks to join a credit union, helping them to access a safer form of finance and get their lives back on track.

And for the first time in Northern Ireland a new education project will be created to raise awareness of the dangers of loan sharks and to support vulnerable communities.

John Glen, economic secretary to the Treasury, said: “These nasty lenders are nothing more than lowlife crooks taking hard-earned cash from the pockets of the most vulnerable. Over 300,000 people are in debt to illegal money lenders in Britain and they need to know that we’re on their side. That’s why we’re taking the fight to the loan sharks and spending more than ever to support their victims.

But StepChange, one of the UK’s leading debt charities, warned the wider issue of legal high-cost credit should not be forgotten either. An estimated 1.4 million lower income households turned to high-cost credit to meet day to day living costs last year.

The charity has urged the government to support action both on illegal loan sharks and on better alternatives to high-cost credit more generally, with a renewed commitment to ensuring people in financial difficulties have viable options that will put them on a more sustainable footing.

While increasing signposting to credit unions is helpful, the charity says that credit unions alone are unlikely to have sufficient capacity or resources to meet the full spectrum or scale of need.

“Cracking down on the unconscionable activities of loan sharks is a very welcome step. It needs to be accompanied by a twin-track focus on the high-cost credit market more generally, to reduce the harm being experienced by vast numbers of households who are forced to borrow to make ends meet,” warned Peter Tutton, head of policy at StepChange debt charity.

“Now is the time for the government to explore creative, sustainable alternatives to meet the needs of financially vulnerable households.”

How to spot a loan shark

A loan shark might:

• Offer little or no paperwork, such as a credit agreement or record of payments

• Refuse to give information, such as the interest rate or how much you owe

• Take items as security, such as passports, bank cards or driving licences

• Increase the debt or add additional charges at any time

• Refuse to allow you to settle your debt

• Get nasty – they might resort to intimidation, threats or violence

The Financial Conduct Authority (FCA) keeps details of all authorised lenders.

If a lender isn’t listed as having a current authorisation to lend money, don’t borrow money from them and don’t let them come into your home.

Check the FCA Financial Services Register to see if a lender is authorised.

Although some loan sharks resort to intimidation and even violence, they are not beyond the law.

Any lender – authorised or not – who harasses you is breaking the law.

Some loan sharks will threaten you by saying you will be prosecuted and even sent to prison if you don’t pay up.

This can’t happen – an unauthorised lender such as a loan shark has no legal right to recover the debt. In fact, they have no legal right to make you pay the loan back at all – because the loan is illegal.

If you have been approached by someone you think is a loan shark, you need to report them to the police, particularly if you are in immediate danger.

Source: Money Advice Service​