LONDON (Reuters) - Britain’s government on Wednesday pledged fresh funds to crack down on illegal money lenders, who charge unfair high interest rates and often intimidate, threaten and trap vulnerable victims in a cycle of fear and violence.
An estimated 300,000 people are in debt to loan sharks across the country, although experts say numbers could be much higher in the so-called ghost economy; a realm without paper trails in which victims are often too ashamed to step forward.
The finance ministry said specialist, regional Illegal Money Lending Teams (IMLT), which investigate and prosecute such lenders and support their victims, would receive 5.7 million pounds this year, 16 percent more than last year.
It is illegal to lend money without correct permissions in Britain.
The IMLT in England has launched more than 380 prosecutions, seen offenders jailed for a total of 380 years, supported more than 25,000 people and written off over 73 million pounds of illegal debt since it was established in 2004, the government says. Similar teams operate in Scotland and Wales.
“Loan sharks are a blight on society and prey on vulnerable people who struggle to make ends meet,” said Tony Quigley, the head of the English IMLT. “These criminals use callous methods to enforce repayment and victims are often subjected to threats, intimidation and violence.”
IMLTs are funded by a levy imposed by the Financial Conduct Authority (FCA) regulator on thousands of companies offering consumers credit.
In a report on illegal money lending published last November, the FCA said the market operated below the regulatory radar, with both consumers and lenders involved hard to reach and reluctant to talk.
Lenders tended to keep within local boundaries and relied on word of mouth for customers.
“One young woman was punched in the face at a house party in front of a room full of her peers as punishment for non-payment,” it quoted one IMLT report as saying. “No one would report the attacker even though many people saw what happened and who had done it.”
People who used loan sharks are often vulnerable to exploitation, either because of financial desperation or inherent vulnerability to influence and manipulation.
Illegal lenders would seek them out, put them in their debt and seek to keep them there, providing lenders with an ongoing income stream, the FCA said.
Reporting by Kirstin Ridley; Editing by Mark Potter