LOAN SHARKS AND PREDATORY LENDING
ILLEGAL MONEY LENDING
With today's economy, it can be tough to meet the escalating costs of day-to-day living. Banks and other financial institutions are rejecting loan applicants a lot more frequently than before, having become more stringent with their loan criteria. This has left those with urgent money problems to turn to other, more disreputable, alternatives: illegal money lenders.
'LOAN SHARKING' AND THE LAW
Commonly referred to as 'loan sharks', illegal money lenders are rogue financiers who are not regulated by any governing body, such as the Office of Fair Trading or the Financial Services Authority. As such, they operate outside of the law. More and more people are turning to loan sharks without fully realising the lengths they will often go to in order to extort more money from their dependants, often under the guise of collecting exorbitant amounts of interest. Once a loan has been taken out, it is not uncommon for loan sharks to harass their clients into taking out further loans to repay the interest on their last loan, trapping the customer in a cycle of debt that can be very difficult to escape from. Because they operate illegally, loan sharks often utilise the threat of violence - either to the client or their family - in an attempt to intimidate the borrower. In addition to this, they often take personal belongins or documents as a form of security to ensure that their loans are repaid. Loan sharks manipulate their customers into providing their personal information, whilst, at the same time, withholding their own information from the customer, or even details about their services or loans. This allows them to easily manipulate those indebted to them, and allows them to avoid easy detection by the police.
Even though loan sharking is illegal, those who borrow money from them have not committed a crime. Loan sharks may try to scare borrowers by threatening them with prosecution, but, because they are not an officially recognised money lender, they have no legal claims to seek repayment. Similarly, the customer is under no obligation to repay and cannot face any criminal proceedings as a result of non-payment; culpability lies solely with the loan shark, and, if their activities are discovered, they are the ones who could be prosecuted.
PAYDAY LENDERS
Loan sharks are not the only example of predatory money lenders. In the last few years the UK has seen a rise in the number of organisations offering unsecured, short-term personal loans. Unlike loan sharks, these companies operate legally, often advertising their services on television and the internet. Such advertisements often glamorise the easy accessability with which their loans can be taken out, whilst, at the same time, hiding the incredible amounts of APR applied withing reams of small print, luring desperate customers who need financial aid quickly. As with loan sharks, the customer may find it increasingly hard to repay the loan and its interest rate. Unlike loan sharks, however, so-called 'payday lenders' work within the law. Because of this, they can legally apply further charges to the customer's loan and, if the customer remains unable to pay the outstanding balance, can initiate legal proceedings against them.
HELP AND ADVICE
The unethical tactics used by predatory money lenders often lead to their clients feeling unable to repay their loans, causing them to worry about the repercussions if they cannot do so. They may feel isolated and trapped, without anywhere to turn for advice on how to deal with their debts. Your local CUSEN can provide useful contact information on how to escape 'bad debt', as we work with other groups and organisations (such as the Citizens Advice Bureau and Direct.gov) dedicated to helping those with financial problems. As a Credit Union, we are also a great alternative to those types of money lender. For further information, please follow the links to our Savings and Loans sections.
USEFUL LINKS
- Citizens Advice Bureau: http://www.citizensadvice.org.uk/
- The Illegal Money Lending Team - Tel: 0300 555 2222; Email: stoploansharks@birmingham.gov.uk
- National Debtline: http:nationaldebtline.co.uk///www.
- Direct.gov: http://alturl.com/ydkvf
- Consumer Credit Counselling Service: http://www.cccs.co.uk
