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Money fears could leave people vulnerable to loan sharks, campaigners warn
28 June 2023, 10:24 | Updated: 14 July 2023, 09:18
Fair4All Finance said illegal money lenders may present themselves as ‘friends’.
Concerns have been raised about struggling borrowers potentially being preyed on by loan sharks.
One in 14 (7%) of people surveyed in June said they or someone else in their household has borrowed from an unlicensed or unauthorised informal money lender who charges interest in the past three years.
The survey was carried out by Ipsos UK among more than 1,800 people aged 18 to 75 across Britain.
Sacha Romanovitch, chief executive of not-for-profit financial inclusion organisation Fair4All Finance, which commissioned the research to shine a light on illegal money lending, said: “There is a growing consensus that structural change is needed to create a credit market that serves everyone.
“Fair4All Finance is convening support from across the financial services sector, regulators and cross-party policy makers to ensure that mainstream banks and lenders better serve millions of creditworthy, lower income individuals alongside accelerating the scale up of community finance provision.”
The organisation is concerned the problem could grow as people look for ways to meet their living costs.
It warned illegal money lenders may present themselves as “friends” to their customers or operate out of businesses which appear legitimate, such as some cafes or pubs.
Some loan sharks may charge people double the amount they originally borrowed and in some cases people are unaware how much they are being charged, it said.
Some borrowers had been used as “money mules” in money laundering operations, it warned, with some then losing their bank account as a result. Money muling is an illegal activity.
Fair4All Finance said borrowers using illegal lenders can end up being harassed with repeated phone calls or visits at home or work and some may be threatened with violence.
It suggested that if someone needs credit and their bank cannot help, they should consider the UK’s community finance sector, made up of credit unions and other responsible lenders.
Martin Coppack, director of social justice organisation Fair By Design, said: “This shows that a lack of access to affordable credit is forcing people to pay a ‘poverty premium’ for credit by resorting to illegal money lenders.
“Access to credit is essential for smoothing out the ups and downs in income that we all experience. Sadly, too many people are using it for essentials like food and energy because they don’t have enough money to make ends meet.”