Loan shark threat increases

17/11/2009

The threat of loan sharks to Brits who have existing debt problems has been highlighted by a new TV investigation.

According to the BBC's Panorama programme, around 200,000 people could be in debt to the illegal lenders - who often use threats of violence to extract extortionate interest payments from customers.

The recession was seen as a key influence on the popularity of the sharks.

Tighter lending conditions on the high street have led to more people with spotty credit records being turned down for new borrowing than before, increasing the popularity of unregulated lending.

Police have responded to the problem by launching a crackdown on the sharks, which has led to around 100 prosecutions over the past five years.

However, Panorama said that regulators at the Office of Fair Trading do not impose criminal record checks on people who apply for a Consumer Credit Licence.

This could open the door to former loan sharks who want to gain a "veneer of respectability" as a regulated lender.

Debbie Wilson also told of her experience with a loan shark, which saw her pay out £88,000 to a single creditor after an initial loan of just £500.

The County Durham resident was also told by the shark that her debt would be sold on to a violent local family if she did not make her payments.

"We were just barely feeding the kids and me and me husband [were] just living on toast so that the kids could have a decent meal," Debbie told the broadcaster.

Kevin Still, EuroDebt director, added: "The Panorama programme has highlighted concerns that have been widely expressed by the money and debt advice sectors, especially with so many restrictions on traditional lending sources. It is not uncommon for people to have missed both priority credit payments and payments to credit card and personal loan providers. This then has a knock on effect on a person's creditworthiness.

"This can create a downward spiral effect where people are borrowing from very expensive and less reputable sources to repay existing credit commitments. This is what EuroDebt call a 'debt spiral'. Our advice would be to seek professional help when it is clear that the household budget is too tightly squeezed and negotiation is required with existing creditors, whether through a self-managed repayment arrangement or a managed service like a DMP or an IVA."

Tags; Income Worries and Debt, Young Family Finances, Credit Card Lifestyle,

Regional Debt Advice; Debt Help County Durham, Debt Help Durham, Debt Advice Durham,

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