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tactics to keep debtors paying out – for example, making unsolicited deposits into a borrower’s account, which they demand be paid back with interest. These gangs threaten victims and their families with violence, leaving them trapped in a vicious cycle of repayment while being unable to make ends meet themselves. It's not only face-to-face extortion which plagues those in financial difficulties. Across the Apple App Store and Google Play, more than 300 predatory loan apps have been identified and removed this year. These apps, much like any predatory lender, offer instant loans at extortionate interest rates. The insidious catch is that, with access to sensitive information such as messages, contacts and even photos on the borrower’s device, predatory loan apps are able to blackmail their users. Indeed, digital loan scams have become so endemic in poorer locales like India that they have sadly led to multiple cases of extorted and threatened
victims taking their own lives. So what’s the answer? How can people in crisis be protected from financial ruin and given the support they desperately need? One answer is to reach out to the appropriately named Stop Loan Sharks charity. More than half of victims who contact the organisation have borrowed money to pay for essentials like food or fuel - a stark reminder of the extent of the current climate of rapidly ballooning expenses. The charity encourages anyone affected to get in touch, and for family and friends to keep a close eye out for possible victims. But we must pose the question, where would these loan shark victims be if there was a flourishing and well regulated HCSTC industry? Would they have avoided the criminal gangs altogether? The industry and the regulators need to take note and find a solution so that access to credit for all, is restored.
More people than ever before are classified as financially excluded or ”credit invisible”. While there is no onus on lenders to be more accommodating of such people, it would be prudent to be aware of the lending landscape as it exists today, and the numerous challenges - and risks - faced by those less financially fortunate. “These loan sharks will spot a vulnerability, and they will prey on it. They're not running affordability checks, they don't care if you pay your rent or can put food on the table. They just want to take as much of your money as possible. The only advice I'd give is get help straight away, it's never too late, don't put yourself through it." Cath Williams Stop Loan Sharks
The war on loan sharks Whether it's predatory payday providers or so-called friends with dangerous connections, lenders preying on society's most vulnerable are ever-present
At about the same time as the 2008 financial crisis, the UK witnessed the rapid rise to prominence of so-called “payday loan” providers. Businesses such as Wonga and QuickQuid became notorious for their extremely accessible loans with high interest and in many cases, spiralling fees. Record profits for these companies swiftly translated into record complaints by consumers blindsided by rates as high as 4,000%, and it was clear that regulations were sorely needed to prevent short-term loans ballooning into unaffordable, and in some cases devastating, debts. In January 2015 the Financial Conduct Authority imposed restrictions on the unfettered activities what they called “predatory” lenders.
Daily interest rises were capped, default fees limited and the total amount repayable could not exceed double the amount borrowed. Lenders who had previously taken advantage of “easy money” now found their business model gutted. The result? Unsurprisingly, Wonga reported significant losses within the following two years. It seemed the age of ultra-high-interest instant borrowing was at an end, or at least kept on a very tight leash – and yet, a stark warning followed. Without readily available lending options for those in dire need, borrowers would seek out the only people willing to lend regardless of credit history or financial exclusion; those unsanctioned, unregulated and unburdened by morals. Loan sharks. Fast-forward to 2022, and the prophecy has unfortunately come to pass. The imminent cost-of-living crisis continues
to pile pressure on an already financially strained general public. It’s estimated that 1 in 7 people in the UK are “financially excluded”, preventing them from acquiring loans or other legitimate monetary assistance. Especially around the Christmas period, making ends meet can seem an insurmountable challenge for many. In such dire straits, an offer of short- term financial aid from a neighbour or friend is an invaluable lifeline. Sadly, the old adage applies: if it seems too good to be true, it usually is. A small loan of £50 or £100 between “friends” is happily granted, with the caveat of an exorbitant interest rate. Inability to pay back this extortionate interest leads to further borrowing, which leads to even greater interest – you can see where this is going. In truth, these loan sharks are operating at the behest of criminal gangs. They’re not afraid to resort to cruel and unusual
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Q4 | 2022
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