As the cost of living continues to rise in the UK, a worrying trend has emerged: the increasing prevalence of illegal moneylending. This phenomenon, also known as loan sharking, has seen a surge in recent years, with individuals and families turning to unofficial lenders to make ends meet.
The Loan Sharks
Two illegal moneylenders, referred to as “D” and “M” to protect their identities, have shed light on this growing issue. “D,” who has been in the business for two decades, says that business has never been better. He lends money illegally to hundreds of people across the country, with most of his “customers” being regulars who pay off their debts within two to three months. However, they usually return a few weeks later, trapped in a cycle of borrowing.
“D” notes that with inflation remaining high, demand has soared. He now hears from single mothers and families looking to borrow smaller amounts of £500 to £1,000 to pay for necessities like gas, electricity, and groceries. The interest rates he charges can be as high as 50%, or even “double bubble” terms, where the original loan is doubled each month.
“M,” on the other hand, caters to a different clientele. He lends to “the rich” – people borrowing higher amounts to fund house renovations or to rescue a struggling business. He claims to have lent millions of pounds over the past 20 years and currently has about £2m out in loans.
The Borrowers
Research commissioned by Fair4All Finance, a government-backed body that works on financial inclusion, suggests that the potential client base for illegal moneylenders could be expanding. Current users are borrowing about £3,000 on average, and clients are more likely to be lower-waged, full-time workers.
The consequences of borrowing from these lenders can be severe. “D” refers to himself as an “enforcer,” alluding to the brutal consequences that can ensue if payments are missed. These can range from property damage to physical violence. “M” uses a different approach, relying on fear and intimidation to ensure repayment.
The Response
The rise of illegal moneylending has prompted calls for more efforts to help people manage their debts and to boost alternative options such as community lenders or credit unions. According to the Bank of England, about 1.98 million people across the UK use credit unions. However, there is a long way to go before these can plug the gap left by the exit of higher-cost lenders.
As prices continue to rise, business for illegal money lenders like “D” and “M” shows no sign of slowing. However, as Cath Wohlers of the Illegal Money Lending Team warns, “They will absolutely bleed you dry. It’s just not worth it. If you are in debt, speak to your creditors and have conversations rather than borrowing more money to get out of it.”
This rise in illegal moneylending is a stark reminder of the economic strain many people are under in the UK. As the cost of living continues to increase, it is crucial that more accessible and safer lending options are made available to those in need.
