What is a loan shark?
An illegal loan shark refers to an individual or criminal group that offers loans at extremely high interest rates, with terms that are not legally enforceable or regulated.
Loan sharks charge exorbitantly high interest rates that far exceed legal limits set by law or regulation. They operate outside the legal financial framework, meaning they do not have the necessary licenses or permissions to legally lend money. As a result, they are not bound by consumer protection laws, which would otherwise regulate interest rates, collection practices, and loan agreements.
Loan sharks often employ aggressive, and illegal, methods to collect debts. This can include threats, intimidation, violence, or harassment towards the borrower or their family.
They typically target people who cannot access traditional credit due to poor credit history, urgent need, or lack of alternatives. This exploitation is particularly prevalent in low-income communities or among those with immediate financial emergencies.
The impact of loan sharks
There have been a number of studies now including fair4all finance and the Joseph Rowntree foundation which estimate that around 3 million people have now borrowed from an illegal loan shark because they didn’t have any other legal lending option.
This massive increase in the number of people borrowing from illegal loan sharks is having a serious detrimental effect not only on the borrowers but also their family members.
The illegal moneylending team are finding that once a victim takes a loan from an illegal loanshark they just cannot get out of the illegal debt trap. Many people are having to make repayments for years and years.
The centre for social Justice found that many loan sharks go on to terrorise their victims by harassing them with what’s app ‘disappearing messages’ so that there is no proof for the police or the illegal money lending team.
The effects on borrowers can be horrendous with nearly 10% of illegal loan shark victims going on to attempt suicide. This statistic increases even higher when it includes suicide attempts after the debt is repaid.
There is a call from within the finance industry that the only way to stop illegal lending form loan sharks is through some incentives to entice regulated licensed lenders into the sector to ensure that essential credit is being provided as this will immediately reduce the demand for illegal loan sharks.
