DCSIMG

How to take the bite out of loan sharks

Picture posed by models

Picture posed by models

  • by Miles O’Leary and Hannah Butt
 

THEY’RE a menace to society and can bring families to their knees.

Loan sharks often target the most vulnerable people and offer them loans with extortionate interest rates slapped on top – making it near-on impossible to pay back.

What can start off as a kind offer from a friend of a friend or a stranger down the pub often turns into a horrible nightmare.

The problem with loan sharks – people who lend money illegally – is just as rife in Portsmouth and its surrounding areas as anywhere else.

Local support agencies are finding that more and more residents are coming to them in desperate need of some guidance over how to deal with a money lender they’ve been caught up with.

The Roberts Centre, in Crasswell Street, Landport, help families with debt on top of a range of other issues.

Carole Damper, the organisation’s chief executive, said it sees a lot of people who turn to loan sharks because they don’t have enough credit to get a bank card in order to pay off hefty bills.

She believes the situation hasn’t been helped by the government cutting back on funding.

She said: ‘It is a big problem across Portsmouth. and we see a lot of people come in who do not have credit cards, and so they turn to loan sharks or pay day loans to pay for things. 

‘The issue is that social funds in the last 18 months have been cut and so people are looking for other ways to pay for things in a crisis.

‘The government has cut the provision of emergency funds which means that it is difficult for families to budget for everything.

That will  have a massive impact on the public because that is the only safety net for essential items. 

‘It will force more people in to borrowing money.’

Jane Henderson, manager of Advice Portsmouth, in Kingston Crescent, Portsmouth, said 15 to 20 per cent of the clients her advisors see have problems with pay-day loans and loan sharks.

‘It is a problem, and I do not know if it is any different from anywhere else,’ she said.

‘If someone does come in and says that they are having problems in paying back their loans from independent loan sharks, we do advise them to go to the police and to find other avenues to borrow money.

‘These companies will take advantage of people who need money urgently and have no other way of getting it.

‘The way in which loan sharks work is bordering on criminal but they will argue that they are providing a good service for people. 

‘The easy access is what you do not get from banks. If they need a small sum of money, people tend to think this is the easiest way to get it.’

There is also a dedicated team of workers acting on behalf of Portsmouth City Council that are not only providing help – but stamping out illegal practices wherever they can.

As reported, Birmingham City Council’s Illegal Money Lending Team has been hired to work in the city until March 2015.

The team of investigators are finding out where illegal money lending exists and prosecute those doing the work.

The purpose of the move is to get a clear understanding of the scale and impact of the issue, and find out what the best form of enforcement is.

It’s hoped that it will help victims come forward and feel more confident that action is being taken.

It came after a report by Alan Cufley, the council’s head of corporate assets, business and standards, warned illegal lending is happening across ‘all sectors of the community.’

The team, which works with local authorities across the country, collect confidential information about a loan shark operating in a community, and once they think they’ve got enough to track them, action is taken.

They apply to a court for a warrant to search their house for any suspicious activity – which could include evidence to show they are living outside of their means and huge bundles of cash are being stored.

An arrest can then be made and the team act as the prosecution in court, and take up other crimes that might be linked to it – such as rape and drug offences.

Since December last year, nearly 3,000 illegal lenders have been identified, 600 loan sharks have been arrested, more than £40m worth of illegal debts has been written off and there have been 218 prosecutions, resulting in prison sentences totally more than 140 years.

Tony Quipley, who is head of the team, said that while there aren’t any active cases nor recent prosecutions in Portsmouth, that doesn’t mean leads aren’t being pursued, and people aren’t living in fear.

Two officers assigned to the south region meet with councils, housing associations and debt agencies regularly about information they’ve been given and know about.

He said the absolute key to dealing with loan sharks was having the courage to speak out so justice can be done.

‘We need people to give us good, solid information,’ he said.

‘But whatever is given to us is great. It helps to put the pieces of the jigsaw puzzle together.’

So how does a loan shark typically operate?

‘It tends to be that friendliness,’ Tony explained.

‘They will build up a rapport with you.

‘They will end up being one of your best friends in the world and you think you know what you are getting into.

‘They seem to be doing you a favour.

‘It’s when you miss a payment – that’s when things get to the stage where you might be threatened.

‘We had a case where the loan shark would cut the wires to someone’s television and phone and just sit outside the house.

‘It’s obviously quite intimidating if you are in the house on your own.

‘The same guy would collect the person’s children from school and bring them home.

‘He wouldn’t do anything to harm them, but it was a message that this is what they could do.

‘It’s a form of control and it’s similar in a way to domestic violence.’

Tony said the biggest interest rate the team have ever seen imposed on a loan is 131,000 per cent.

To put that in money terms, the resident got a £250 loan, and in return they had to pay back £90,000 over 19 years.

Councillor Luke Stubbs, deputy leader for Portsmouth’s Conservative group, said: ‘It’s good that the council is trying to do something about this.

‘Also, the authority is also promoting credit unions as a way of providing cheap, small loans to people who otherwise can’t get them.’

Who is a legal money lender?

A LEGAL money lender will have a licence from The Office of Fair Trading – so make sure that whoever you’re borrowing from, you ask to see proof of that.

Tony Quipley, of the Illegal Money Lending Team, said the government department carries out checks beforehand to see if any would-be lenders have a criminal background and a history of money problems, as that could be a reason for wanting to become one.

A legal money lender who results to violence to get cash back is acting illegally and should be reported.

The Office of Fair Trading is changing in April to become part of The Financial Conduct Authority, but that doesn’t change the requirement to have a licence.

There are 240 registered pay day lenders and their worth is around £2bn.

The APR of legal money lending companies such as Wonga is 5853 per cent, but that is allowed because there is no cap on interest rates nor is it illegal to issue sky-high interest rates in this country.

Which? published a report saying that for every £100 borrowed from the average pay day loan companies, there is £25 interest.

Carole Damper, chief executive of The Roberts Centre, has called for TV adverts encouraging people to seek pay-day loans to be banned.

‘People get themselves into these situations because they don’t have the money at the time to buy these essential items, and so have to pay them off in instalments which is a lot more expensive,’ she said.

‘These companies take advantage of the poorer people in society.

‘I think people should be warned about it and adverts on the television should be banned.’

The role of pawn shops

LOCAL pawn shops say more people are turning to them for support as they seek to avoid loan sharks and money lending companies.

James Bell, manager of Cash Zone, in Greywell Road, Leigh Park, said more people are selling their possessions to pawnbrokers on a buy­back premise.

He said people prefer to do this as it allows them to borrow the money they need, and then once they’re in a better financial position they buy back whatever they sold.

Talking about money lenders, he said: ‘They just have a bad image really.

‘They charge phenomenal APR on any amount of money.

‘The only good thing about them is you can do it all from home at any time where it is all online, but for me, the cons 100 percent outweigh the pros.’

A member of staff at Goodalls, in Cosham, Portsmouth, said: ‘Money lending services are an insult to the population. 

‘Payday lenders should just be avoided as they’ll get rich by lending a small amount of money and charging almost dangerous amounts of interest on the repayments.

‘It all needs to be better regulated, but for now, they’re just a waste of time and an easy way to get into a financial mess.’

Reporting loan sharks

Loan sharks are illegal moneylenders who often charge very high interest rates - check if a company is licensed and how to report one that isn’t.

If you spot a loan shark, or have borrowed money from one, you can report them anonymously.

If you have been approached by one and are in immediate danger then you should call the police.

Alternatively, email the Illegal Money Lending Team on reportaloanshark@stoploansharks.gov.uk or call 0300 555 22 22

Text LOAN SHARK and the lender’s details to 60003.

You can also send a private message to the team via its Facebook page; facebook.com/stoploansharksproject

To check which companies have a licence, call Consumer Credit Register on 020 7211 8608.

The line is open Monday to Friday from 9.30am to 4pm.

 

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