There’s no doubt that the chaos of the pandemic will reverberate through global economies for years to come. But, one stand-out issue is causing tremendous concern in the financial world: the rise of loan sharks. Lockdown has made life easier for criminals, with so few investigations that unlawful lending has run riot.
Why Has Loan Sharking Increased During the Coronavirus Crisis?
Loan sharking has risen massively, contributed to by:
- People looking for faster financing without protection from illegal lenders.
- Lack of investigatory capacity due to lockdown restrictions.
- Fears of financial pressures, creating a bubble of panic.
Many people who fall foul of such lending may not realise their lender is, in fact, a loan shark or didn’t appreciate how quickly their debts could spiral.
Wonga recently published a report identifying the impact on consumers who can’t access mainstream credit and the potential links between more robust regulation and increasing unlawful lending.
Most of us know how enormous the damage of uncontrolled lending can be and the severe impacts it can have on families and tight-knit communities.
However, in a period of financial uncertainty with fewer loans available from traditional banks, around nine million more people in the UK had resorted to credit in the six months to December 2020.
What Can People Impacted by Loan Sharks Do?
There are several considerations here.
Not least, regulators must address the backlog of investigations and issues caused by a substantial drop in available consumer credit during the pandemic.
It’s also essential to acknowledge how difficult it can be for people to realise they’re using a loan shark.
Brett Van Asweng, Wonga CEO, explains this predicament in reference to mashonisas, the term for illegal, unregulated lenders who cater to people desperate for cash but unable to secure conventional credit from a formalised provider.
Van Asweng says:
‘We can certainly have a stereotype in our mind of what a mashonisa looks like. They are not the stereotype that you think – there isn’t a clear demographic that defines what a mashonisa looks like. They span the age range from early 20s to retirement.’
Therefore, the first step is to raise awareness of the dangers and ensure that consumers have access to information to avoid making bad decisions.
Money Helper has a very useful guide that explains tips to spot loan sharks, I suggest you give it a read. The debt charity Step Change also offers advice for people impacted by illegal borrowing, with phone numbers for illegal money lending teams across the UK.
Have you been affected by loan shark debt? I would be interested to hear your experiences in the comments below.