200,000 people in Britain are at risk from illegal loan sharks because they cannot access credit from traditional lenders according to a new report.

A combination of the reduction in sub-prime lending and the economic downturn may lead to more people having to use illegal money lenders according to the think tank, the New Local Government Network.

The report predicts that an additional 35,000 people are likely to have to use loan sharks during the recession but admit that the figure could be even higher.

Author of the report, Chris Leslie says: “There is evidence to suggest that the pernicious trend of illegal unsecured lending at extremely high rates of interest, or ‘loan sharking’, is making a comeback. The diminished availability of regulated sub-prime credit is creating conditions where a sizable number of people have little option but to borrow from illegal sources. At least 165,000 people already use loan sharks in the UK and we can expect the number to rise sharply."

Loan sharks are unlicensed money lenders, who operate illegally and are not regulated by the financial industry. They are prepared to lend to the financially vulnerable but charge astronomical interest and the borrower is not protected by any form of contract or terms and conditions. Some credit unions have even reported loan sharks charging interest of up to 2,500,000%.

SOURCE: NLGN, 25/05/09

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