The Dangers of Loan Sharks
(For more future updates, kindly subscribe to this blog's feeds via RSS reader or via e-mail.)
In a predictable but worrying development, a local-government think tank had published a report stating that a growing number of people in the UK are likely to use loan sharks during the recession.
It is estimated that 35,000 more people could turn to illegal money lenders because of the squeeze by traditional lenders making it more difficult to get credit through the normal channels.
The New Local Government Network report said Stoke, Gateshead, Lincoln and Manchester were among the places most likely to be targeted by loan sharks and called for councils to pump funds into credit unions.
The author of the report has said that ‘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.’
The New Local Government Network think-tank was founded in 1996 with aim of raising the credibility of local government. Some may say they have not been conspicuously successful in this role.
However, this important report makes the point that at least 165,000 people are already using loan sharks in the UK.
As if this isn’t high enough, it is expected to rise sharply because the global downturn has caused the regular sources of lending to greatly restrict their activities.
This includes traditional lenders and sub-prime lenders, which has also increased the rate of refusals for those seeking loans.
This last point is particularly important. 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.
Loan sharks are those operators who are unregulated and demand very high rates of interest They are apparently most likely to operate included Lincoln and Manchester, the think-tank said, although they pose a danger anywhere in the UK that there are desperate people in need of credit.
The think tank has recommended that councils set up their own banks or to pump funds into regulated credit unions to offer affordable credit to people who cannot access High Street loans.
Those counter measures will take some time to implement, if they are indeed accepted. However, everyone can take action against loan sharks by never using them, reporting their activities to local authorities and advising friends, relatives and neighbours of the dangers they pose.
