Why People Turn to Loan Sharks
April 13, 2010There is a severe problem with illegal lending both in the UK and in other developed nations around the world. These illegal lenders, more commonly known as ‘loan sharks,’ are unlicensed and therefore unregulated. It is thought that in the UK alone, 100,000 families borrow money from loan sharks every Christmas and even more throughout the remainder of the year.
Loan sharks do not operate within the law and this means that they have no care, nor do they adhere to, the regulations set out by the Office of Fair Trading. The OFT regulations include rules about interest rates and fees as well as the conduct the lenders must use when trying to reclaim monies from defaulting borrowers. Because the loan sharks do not adhere to these rules, they often charge extortionate rates and can become threatening in the event of missed repayments.
Given this information, why do families still borrow from lenders like this? Well unfortunately, some families are simply unable to obtain credit elsewhere. In fact, in the overwhelming majority of cases, the borrowers are those who are unable to borrow from banks and licensed lenders, often because of previous credit history issues or a low income. These people may find themselves desperate to obtain credit for a variety of reasons and feel as though they have no choice other than to go to an unlicensed lender.
Loan sharks know this and operate in areas where the income is lower and where there is a lot of poverty. They prey upon those in the direst financial circumstances and blind the borrowers with promise of a quick and simple loan. In their anguish and need for a quick financial boost, these borrowers are susceptible to the lenders.
Unfortunately, the problem is a big one and is ongoing. As a result of the recent recession, higher unemployment and financial problems have contributed to the ongoing issue. It is going to be imperative that the Government make education and advice on tackling illegal lenders available to the poorer families.
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