Loan sharking: changing patterns in, and challenging perceptions of, an abuse of deprivation

Abstract

Background: Illegal high interest lending or 'loan sharking' exploits the vulnerable and has profound negative impacts on individuals and communities. The 2008 UK financial crash and subsequent austerity programme coupled with changes in the consumer credit market have fuelled an increase in predatory lending.

Methods: The study is a descriptive analysis of demographic, financial, health and behavioural data on 753 victims (2011-2017). A review of the causative factors and potential political, economic and public health responses is analysed.

Results: Most victims were female but males were considerably more indebted. Illegal loans are largely taken out for routine living expenses and over 70% of victims reported other serious debts. Victims are disproportionately poor, unemployed and on benefits but fewer than half have had financial or benefits advice. Despite 90% reporting they would not borrow illegally again, 30% had previously done so from the same shark and over half considered them a friend.

Conclusions: The increase in loan sharking has coincided with the withdrawal of traditional sub-prime lenders and local welfare assistance schemes, and the low penetration of Credit Unions in many areas. Conventional perceptions of loan sharks and their relationships with victims are largely incorrect. A range of coordinated financial, political and social interventions is required.

Keywords: Finance; Poverty; Socioeconomics factors.