Loan sharks make a comeback in recession-hit UK
26 May 2009
A growing number of people in the UK are turning to loan sharks during the recession as they find it difficult to borrow money legally from bailed-out banks that seem incapable of lending, says a local British government think-tank.
An estimated 35,000 more people could turn to illegal money lenders because of the squeeze by traditional lenders, according to a report by The New Local Government Network. The report said Stoke, Gateshead, Lincoln and Manchester were among the areas most likely to be targeted by loan shark mobs.
"There is evidence to suggest that the pernicious trend of illegal, unsecured lending at extremely high rates of interest, or loan sharking, is making a comeback," said the report's author, Chris Leslie.
The think-tank, founded in 1996 and aimed at raising the credibility of local government, said at least 165,000 people already used loan sharks in the UK. But Leslie said this number was expected to rise sharply because the global downturn had caused regular sources of lending to dry up.
Traditional lenders and sub-prime lenders have increased the rate of refusals for those seeking loans. "The diminished availability of regulated sub-prime credit is creating conditions where a sizable number of people have little option but to borrow from illegal sources," Leslie said.
The tightening of credit and with companies such as Cattles restricting how much they lend, the think tank warned that around 250,000 people will lose access to traditional sources of borrowing cash. It called for councils to pump funds into regulated credit unions to offer affordable credit to people who cannot access regular loans.
Charging highly usurious rates of interest, loan sharks often use violence to back up demands for cash from those who cannot meet the payments.
The problem of loan sharking has been prominent for some time now, with MPs in both the UK and New Zealand having demanded a crackdown on such operations in recent days.
