Displaying items by tag: loan sharks

Loan sharks say business has never been so good, but there are huge risks attached to this type of borrowing. One loan shark calls himself an ‘enforcer’- referring to what happens if payments are missed. ‘The car is damaged, house windows and doors are pulled out, and even people get badly beaten.’ He says beatings are rare but admits to breaking legs, smashing teeth or eye sockets, leaving people hospitalised. Nearly all his customers are regulars, paying off debts within two or three months - then they are back a few weeks later. With high inflation demand has soared. He now hears from single mums and families needing smaller amounts of £500 to £1,000 to pay for gas or electricity or for groceries. Interest rates up to 50%, or ‘double bubble’ terms, where the original loan is doubled each month, are often applied. Most clients would accept any terms, out of desperation. Borrowers are usually lower-waged, full-time workers.

Price increases are making it tougher for households to make ends meet, and unlicensed lenders offer loans to the desperate at astronomical interest rates. Last year the Centre for Social Justice (CSJ) researched 3,363 people. One in forty were borrowing from unlicensed lenders. CSJ thinks there are about a million people in England doing this. ‘Overwhelmingly, people borrow when they're desperate. For everyday costs of living, like a gas or electricity bill, or a pram, and then they get exploited by those seeking to extort them for as much money as they can get out of them, offering arbitrary terms, little to no paperwork and an extortionate repayment rate.’ ‘It's just endless,’ one victim said: 'I went from a £150 loan to owing £6,000 in months'. The CSJ report highlights separate data from 1,252 victims, questioned last year by the Illegal Money Lending Team, which prosecutes loan sharks in England. The figures suggest the borrowers are among the poorest in society.

In July 2013 you were asked to pray for measures to be taken to end Wonga-style loans, after the Archbishop of Canterbury boldly stated he would tackle the scourge of high-cost payday lending and work towards expanding credit unions. On 30 August Wonga, the payday lender with extortionate interest rates, collapsed into administration after it was brought down by a welter of compensation claims. On 1 September the Guardian reported, ‘Credit unions on the rise’. Credit unions, not-for-profit cooperatives, are owned and controlled by their members and traditionally specialise in loans and savings for the less well-off. In a credit union, members pay in small sums to their account and can then access loans. Justin Welby’s prophetic statement that he would ‘compete’ Wonga out of existence appears to becoming a reality as loansharking is shrinking. See