‘Perfect storm’ could create more loan shark victims, warn Credit Unions of Wales and the Wales Illegal Money Lending Unit
A ‘perfect storm’ of conditions could lead to a surge in illegal money lending, according to Credit Unions of Wales and the Wales Illegal Money Lending Unit (WIMLU).
WIMLU and Credit Unions of Wales say the financial impact of Covid on people’s incomes and the closure of regulated doorstep lender Provident will create opportunities for loan sharks.
Leanne Herberg, CEO of Cardiff and Vale Credit Union said: “The closure of high-cost provider Provident’s doorstep lending has the potential to help people move away from a cycle of debt, but we need to ensure that it doesn’t provide an opportunity for illegal providers.
“There is a real risk that loan sharks will move in on those families and communities that are familiar with doorstep lending, to offer a quick solution, but with possibly disastrous consequences. Loan sharks appear friendly when they offer the loan, but are likely to use threats, intimidation and even violence to force extortionate repayments.”
The warning comes after a new report by Welsh think-tank the Bevan Foundation found that one third of Welsh households don’t have enough money to cover the basics.
The Snapshot of Poverty in Spring 2021 report noted that ‘friends and family’ had become the main source of borrowing for households since January 2021. This was highest among those on lower incomes where it made up 14% of borrowing.
Author of the report, Dr Steffan Evans said: “The pandemic has had a devastating impact on families across Wales. Any households pushed into debt are set to find the next few weeks and months challenging, but these challenges are set to be particularly acute for people forced to borrow from illegal lenders.
“It is vital that support is made available to people, so they are not pushed into hardship”.
Research by the National Illegal Money Lending Projects in October 2010 showed that loan sharks had grown in the last recession, ‘with growth attributed by victims primarily to shrinking supply of high-cost credit in deprived estates.”
Sarah Smith, WIMLU manager said: “We urge people not to borrow money from unauthorised lenders; unfortunately, those offering loans who appear to be ‘friends’ or may even be family members, may turn out to be loan sharks.”
As not-for-profit financial cooperatives, credit unions across Wales offer fair and affordable loans from as little as £100 up to £15,000 and are working to make their services more accessible with collection points, branches, and online services.
Claire Savage, policy officer for Credit Unions of Wales added: “Everyone needs credit sometimes, but it needs to be safe and affordable, so we would urge anyone thinking of taking a loan to check the interest rate, length of the loan as well as the weekly or monthly amount.
“Before you agree to anything, with a few clicks on your mobile phone you can check how rates compare to your local credit union.”
WIMLU have a free and confidential 24/7 phoneline for anyone who has been, or has seen friends and family, targeted by a loan shark on 0300 123 33 11.