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Office of Fair Trading warns against using loan sharks | Office of Fair Trading warns against using loan sharks |
(about 4 hours later) | |
By Simon Gompertz Personal finance correspondent, BBC News | By Simon Gompertz Personal finance correspondent, BBC News |
The Office of Fair Trading is warning people not to go to loan sharks to raise cash for presents and festivities. | The Office of Fair Trading is warning people not to go to loan sharks to raise cash for presents and festivities. |
More than a quarter of a million people may be vulnerable. | |
"There's a real danger this Christmas because of the financial situation people are in," said the OFT's director of credit, Ray Watson. | "There's a real danger this Christmas because of the financial situation people are in," said the OFT's director of credit, Ray Watson. |
Loan sharks are illegal money lenders, who hand out cash without a licence and often demand extortionate interest. | Loan sharks are illegal money lenders, who hand out cash without a licence and often demand extortionate interest. |
'Kidnap you' | 'Kidnap you' |
One recent victim of loan sharks talked anonymously to the BBC about her experience, after facing verbal abuse, break-ins and death threats. | One recent victim of loan sharks talked anonymously to the BBC about her experience, after facing verbal abuse, break-ins and death threats. |
"They've got their people that can come kidnap you, shoot you, do whatever they want to you," she said. | "They've got their people that can come kidnap you, shoot you, do whatever they want to you," she said. |
"If you're not paying and you're not co-operating then they'll get someone to come and sort that out." | "If you're not paying and you're not co-operating then they'll get someone to come and sort that out." |
The victim had borrowed a few hundred pounds to replace a broken washing machine and cooker and buy some presents for her children. | The victim had borrowed a few hundred pounds to replace a broken washing machine and cooker and buy some presents for her children. |
But with interest the loan grew to more than £4,000. She had no hope of paying it off. | But with interest the loan grew to more than £4,000. She had no hope of paying it off. |
"They would say we didn't pay them when we did pay them," she recalls. "They could see I feared them, so they took advantage of that, took advantage of the kids crying." | "They would say we didn't pay them when we did pay them," she recalls. "They could see I feared them, so they took advantage of that, took advantage of the kids crying." |
Eventually, she was moved by the authorities to escape the nightmare. | Eventually, she was moved by the authorities to escape the nightmare. |
She is still traumatised, but she wants to warn other families to steer clear of loan sharks, despite the pressure to raise cash at Christmas. | She is still traumatised, but she wants to warn other families to steer clear of loan sharks, despite the pressure to raise cash at Christmas. |
"I've had to move and I can never go back," she says, "It's just not worth it: it's not worth living in fear for more presents under the tree." | "I've had to move and I can never go back," she says, "It's just not worth it: it's not worth living in fear for more presents under the tree." |
Trapping victims | Trapping victims |
New research suggests that 265,000 people are in the dangerous situation of knowing a loan shark and being unable to raise £200 to cover the cost of Christmas. | New research suggests that 265,000 people are in the dangerous situation of knowing a loan shark and being unable to raise £200 to cover the cost of Christmas. |
It is a combination which puts them under particular threat. | It is a combination which puts them under particular threat. |
The figures comes from Policis, a research organisation which analyses illegal lending for the government. | The figures comes from Policis, a research organisation which analyses illegal lending for the government. |
It told the BBC that around 80,000 individuals will definitely become fresh victims of the illegal lenders. | It told the BBC that around 80,000 individuals will definitely become fresh victims of the illegal lenders. |
Typically, £100 borrowed from an illegal lender for a few weeks would cost £280 in interest, so the borrower would have to pay back nearly £400 in all. | Typically, £100 borrowed from an illegal lender for a few weeks would cost £280 in interest, so the borrower would have to pay back nearly £400 in all. |
But the lender's aim is to inflate the debt to an unmanageable sum and trap the victim into making weekly payments indefinitely. | But the lender's aim is to inflate the debt to an unmanageable sum and trap the victim into making weekly payments indefinitely. |
"A loan shark wants control," explains Peter Richardson from London's Illegal Money Lending Team, "This isn't simply about transferring money. This is about someone taking over your life." | "A loan shark wants control," explains Peter Richardson from London's Illegal Money Lending Team, "This isn't simply about transferring money. This is about someone taking over your life." |
Police crackdown | Police crackdown |
The number of households using loan sharks has nearly doubled in the past four years. Last year victims borrowed £120m but had to pay back £450m. | The number of households using loan sharks has nearly doubled in the past four years. Last year victims borrowed £120m but had to pay back £450m. |
The police and Illegal Money Lending Teams have cracked down, arresting 500 loan sharks and writing off £37m of illegal debts. But when one loan shark is removed, another can move into the space which is vacated. | The police and Illegal Money Lending Teams have cracked down, arresting 500 loan sharks and writing off £37m of illegal debts. But when one loan shark is removed, another can move into the space which is vacated. |
As the loan shark threat looms larger, investigators and charities are bracing themselves for a cut in government funding. | As the loan shark threat looms larger, investigators and charities are bracing themselves for a cut in government funding. |
It is widely expected that the Department for Business will unveil a package of savings after Christmas. | It is widely expected that the Department for Business will unveil a package of savings after Christmas. |
Peter Richardson argues that dealing with loan sharks would save the economy hundreds of millions of pounds. | Peter Richardson argues that dealing with loan sharks would save the economy hundreds of millions of pounds. |
He thinks that is a good reason for the Consumer Affairs Minister, Ed Davey, to carry on backing the local teams which are fighting the loan sharks. | He thinks that is a good reason for the Consumer Affairs Minister, Ed Davey, to carry on backing the local teams which are fighting the loan sharks. |
Mr Richardson said: "We're hoping that our success in helping the community will drive him to continue the programme." | Mr Richardson said: "We're hoping that our success in helping the community will drive him to continue the programme." |
Have you had experience of the issues raised in this story? You can get in touch using the form below: | Have you had experience of the issues raised in this story? You can get in touch using the form below: |