Over three million people have borrowed from unauthorised lenders
Over three million people in Great Britain have borrowed from an illegal money lender, a new report has found.
Fair4All Finance commissioned IPSOS to carry out a survey of UK adults, which found that seven per cent said that they or someone in their household has borrowed from an unlicensed or unauthorised informal money lender who charges interest.
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The research showed that many people were resigned to the idea of resorting to an illegal lender, with just one per cent of customers reporting their situation to illegal moneylending teams around the UK. Indeed, many were indifferent about it, with one respondent saying: “He’s just the money man.”
“In today’s rapidly evolving financial landscape, it’s crucial to understand the risks associated with engaging with loan sharks,” said Tobias Gruber, founder and chief executive of ethical credit broker Mycommunityfinance.co.uk. “They may seem like a quick-fix solution if you’re unable to borrow money elsewhere, but they often lead individuals down a treacherous path of financial ruin.”
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Users of illegal money lenders generally borrowed hundreds rather than thousands of pounds at a time, according to the research. The total amount of debt per borrower was £3,000 on average. Repayment rates differed but habitually involved paying double.
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The Joseph Rowntree Foundation recently reported 2.8 million low income households having been declined lending between May 2021 and May 2023, which Fair4All Finance said highlights a growing credit vacuum for lower income households.
“Our research suggests illegal lenders are flourishing in the credit vacuum left by the departure of high cost yet regulated lenders,” said Sacha Romanovitch OBE, chief executive of Fair4All Finance.
“The unintended consequence is that millions of people who can well afford to repay a fair loan are left with fewer safe options.
“There is a growing consensus that structural change is needed to create a credit market that serves everyone. Fair4All Finance is convening support from across the financial services sector, regulators and cross-party policy makers to ensure that mainstream banks and lenders better serve millions of creditworthy, lower income individuals alongside accelerating the scale up of community finance provision.”