Comparing UK Door Step Lenders and Loan Sharks

In the UK there is a tradition of doorstep lending where both legal and illegal lenders advance cash loans directly to a person unable to obtain credit by other means. Each week an agent for a legal door step lender will call round personally to the home of the borrower to collect the agreed payment. Illegal lenders known as loan sharks are more likely to send someone round to extract an amount little dreamt of when the paperwork was never signed and the now exploited victim hides behind the net curtains pretending to be out.

Usurious rates of interest are never discussed when those desperate to get their hands on cash to waste at the bookies, or spend in the pub, take the loans on from these loan sharks. There is no paperwork to sign yet still the victims’ fall for the threats that they will go to prison if they don’t repay their illegal loan. In actual fact they are more likely to suffer intimidation or bodily harm, but not death, as the lenders do still want their money back.

The difference between the door step lenders and the loan sharks are the former are licensed to charge exorbitant amounts of interest, whilst the latter are not licensed to lend money in the first place. Calls for borrowers who have fallen prey to illegal loan sharks to actually turn them in by reporting them to the trading standards agency, which may then well lead to police involvement, may be difficult for a large percentage of the borrowers to do, as are likely to be on the periphery of crime themselves.

Borrowers can hardly imagine that they were dealing with responsible citizens when they took the proffered cash, as most loan sharks are generally involved in criminal activities and operate in densely populated urban areas where everyone’s business is known. Loan sharks are known figures and if someone doesn’t know one they ask around in the area.

Others of course were just fiscally irresponsible in dealing with loan sharks in the first place and could have legally dealt with a doorstep lender who would have allowed them to sign a piece of paper agreeing to be ripped off with ridiculous charges. Either group would be wary of personal repercussions if called to be a witness against loans sharks.

Calls for legal door step lenders to be forced to cap their interest rates have been declined by OFT who are aware that if they introduce steps to curb the worst of legal lending then the borrowers will more likely become involved with the illegal lenders, who make the legal lenders interest rates of 500% (average) look like loose change.

Loan sharks who have been apprehended by the police are generally let off lightly by the courts anyway, making the whole event a bit of a non event. In 2009 the case of a man arrested for collecting £88,000 interest on an initial loan of only £500 resulted in a suspended sentence, and other loan sharks have also received only suspended prison sentences.

One move which OFT could have enforced would have been to ensure that the new breed of online doorstep lenders was forced to publish their terms and conditions online, but this has not been addressed. If you actually apply online for a doorstep loan the interest rates are not disclosed until the deal is signed. Hardly an enlightened way forward when some of these legal lenders are charging interest rates in excess of 1000%.

The regulated payday loan industry in America is much more transparent than the legal door step online industry of lenders in the UK and there is no reason why the UK cannot follow suit in ensuring at the minimum that legal rates are published online even if they are not curbed.