Illegal money lending is a danger that stalks every street in the centre of Blackpool
CLEVR Money and credit union supporter Paul Maynard, MP for Blackpool North and Cleveleys, has called for better support to prevent people turning to ‘loan sharks’ or illegal money lenders.
He raised a debate in the House of Commons this week asking for more support for the England Illegal Money Lending Team, and highlighted credit unions as being one of the solutions to helping people avoid falling into quite terrifying situations.
A spokesperson for CLEVR Money said: “We see people who have fallen into bad debt with loan sharks, and they are terrified and lost.
“People need to be more aware of how easy it is to fall victim to loan sharks and how awful the situation can get by taking even just a small loan from an illegal lender.
“Come and talk to us before even thinking of taking an informal loan, we exist to provide the fair and responsible alternative.
“We thank Mr Maynard for raising the issue in the commons on behalf of the people of Blackpool and the whole country, and we are proud to support the work of the Stop Loan Sharks project.”
Here’s some excerpts from Mr Maynard’s speech to the Commons.
On the surface, illegal money lending sounds as though it might be a rather low technical offence—lending money as a business without approval from the Financial Conduct Authority.
In practice, however, it is a frequently devastating crime that sees the exploitation of the financially vulnerable and carries with it deep financial, mental and physical costs.
Anyone can be the victim of an illegal money lender—indeed, anyone can be an illegal money lender—but known victims tend to share a number of common experiences.
Just over 60% have an income below £20,000 a year and almost half live in social housing.
That constitutes a large proportion of my constituency, as Blackpool has eight of the 10 most-deprived neighbourhoods in the country.
Illegal money lending is a danger that stalks every street in the centre of Blackpool.
It is a risk to almost every home, but those who are often the victims have limited awareness of it.
Sometimes illegal money lenders are called loan sharks, but I am not fond of that phrase, because the problem is much more insidious than the almost-cartoonish quality of “loan shark” suggests.
The lender is not an unknown quantity circling menacingly outside the front door; too often, they are a friend or relation popping round for tea and sitting on the sofa.
When people are struggling to afford the costs of everyday items and bills and often unable to access credit, they turn to someone they know and consider a friend, or even a family member they trust, but they are deceived.
Simply, that lender is not a friend, but a fraud who deceives their victims with an offer of financial support that does not materialise in practice.
Having advanced money to their customer illegally, the lender does not adhere to the stringent credit regulations put in place more widely to protect consumers but exploits their sense of obligation to repay for financial gain.
I was struck by one example in which an illegal lender took all a young girl’s money in repayments because she felt obliged to him, as he had taken the effort to go round and put drops into her pet dog’s eyes because she could not manage it herself.
What an awful situation to be in.
Coercion and intimidation are all too often encouragements to repay, and that should not be the case.
What about when a victim cannot pay?
Illegal lenders have been known to add arbitrary late fees, causing the debt to spiral out of control, and to threaten their victims and even demand sexual favours.
I raise these issues not only because they are a blight on our communities, but because we are facing an increase in the cost of living.
Those on the sharpest edges will be pushed further away from financial inclusion and the legal credit market into the hands of the most unscrupulous.
Finally, let me touch on credit unions and the consumer credit market more widely.
Accessing credit should be something that everyone can do. It should not be stigmatised as wrong for certain types of people.
We need to do much better through innovation at ensuring that those who most need credit can access credit that is affordable, and that successful repayments can open the door to future, cheaper forms of credit.
That journey—the focus of the much lamented and unadvanced Woolard review—is crucial if consumers are to steer clear of illegal lenders.
Part of creating a healthy credit ecosystem is emphasising the role of credit unions, which are strong, community-focused organisations that offer low-cost, alternative credit.
Michelle met her lender on the school playground. She needed money and her friend—her lender—offered to meet that need. She thought she was borrowing from a friend.
When she struggled to repay, her lender made it her business to know when money went into her account so they could make her repay.
The more she repaid, the more she needed to borrow, but that was not all. Michelle received threats, and she had her windows smashed.
As she tried to sleep at night, she was shouted at, making her own home an unsafe place to stay. It got so bad that Michelle and her two children were put into temporary housing.
Why? Because she borrowed £50.