In the face of an escalating cost-of-living crisis, it’s crucial to confront the challenges that lie beneath the surface. Among the pressing concerns is the alarming rise in individuals resorting to loan sharks as a means to secure much-needed funds.
Let’s delve into the shadowy world of loan sharks, shedding light on the pervasive issue and offering valuable insights into how you can navigate these turbulent waters.
What is a Loan Shark?
Anyone who lends money in the UK has to be authorised by the Financial Conduct Authority (FCA) to operate legally. Those who aren’t authorised are breaking the law and are known as loan sharks.
They prey on the uninformed and exploit their vulnerabilities.
"More than one million people were in debt to loan sharks in England."
"More than one million people were in debt to loan sharks in England."
A report by Stop Loan Sharks found in England last year.
The study found countless examples of loan sharks terrorising victims through a steady stream of threatening messages and pictures. Sadly, these effects can be tragic, with more than one in ten loan shark victims going on to attempt to take their own life later on – with 70% of attempted suicides oETArring while the debt is outstanding. Yet, surprisingly, more than half of known sufferers consider loan sharks to be a friend when first borrowing.
These criminals don’t often go around with baseball bats and smash windows. Instead, they use psychological threats and coercive control to extort money from vulnerable people.
It’s common for them to threaten to tell partners or colleagues about someone’s financial problems or take precious wedding rings to ensure further repayments.
A terrifying reality…
Stop Loan Sharks found in a recent case that a loan shark threatened to involve a victim’s family when they fell behind payments:
The message read: “I will speak to your mum now…And I will come back later… She’s got a nice car.“
The loan shark also threatened to burn the victim’s house down and increase the interest on his £1,000 loan until he owed £7,000.
How to Spot a Loan Shark
Firstly, verify that a lender is authorised to lend money by checking the Financial Services Register. If they’re not listed, they can’t lend money legally. If you’re still unsure about their legitimacy then you might want to contact FCA directly after looking at the register.
What are other warning signs?
- You were offered a cash loan – Loan Sharks traditionally deal in cash but be aware that they may operate online too.
- A lack of clear information about the loan – e.g. the interest rate or repayment terms. If they are vague about the amount of interest they charge and when the loan will be paid off then this could be cause for concern.
- Lending with no checks – Unlike authorised lenders, loan sharks won’t do credit checks or affordability assessments.
- A lack of paperwork – All legal lenders will provide you with the necessary paperwork explaining the terms of the loan. Loan sharks won’t give you a formal agreement.
- Threatening and violent behaviour – Loan sharks many take valuables, or even items such as your passport or bank card, which they say will act as “security” on the loan.
You can find out more information about how to report a loan shark anonymously.
Alternative to Loan Sharks
If your income is low, you have a poor credit rating or you only need a small amount for a short while, there are regulated lenders you can turn to instead of loan sharks.
Credit unions are not-for-profit, member-owned, community savings and loans providers. They are registered with the FCA and have a few core aims:
- To provide loans at low rates of interest
- To encourage all members to save regularly
- To guide members and signpost to external financial advice
Becoming a member is easy and open to everyone who meets the unique criteria of each credit union.
For example, EuroTrust Credit Access is open to everyone who lives or works in the East of Scotland. We provide access to easy saving, ethical loans, and support services.
We’re authorised by the Prudential Regulation Authority and the Financial Conduct Authority: FRN 213575. So you can verify that we’re a registered and legal lender.
We hope this article has opened your eyes to the world of loan sharks and provided you with a checklist to hold up against lenders you engage with to determine their legitimacy and keep you safe. With greater awareness about loan sharks, we can take a stand against these predatory practices threatening our wellbeing and help each other make smarter financial choices.
