Kidnapping, Violence, and Blackmail – Just Some of the Methods Used by Some Illegal Lenders to Extort Payment.
The warning comes when people who are struggling to make ends meet are urged to avoid loan sharks and their ‘quick cash fixes’, because their money worries could end up as big as the interest charged.
The Local Government Association (LGA) says that in extreme cases, extortionists are prosecuted for blackmail, violence and kidnapping, so they should “be avoided at all costs.”
Lenders operating outside the law can charge skyrocketing interest rates, rely on racketeering, rarely give paperwork, and are likely to put people in deeper debt for longer, the LGA says.
Anyone with money problems is urged to contact their local council and partner organizations for help.
Many people in the UK have suffered income shocks as a result of the financial impact of the crisis as they have been made redundant, have seen their salaries fall or have lost their jobs.
The LGA is concerned that people may wait until they are in serious financial difficulties before seeking help, or turn to sharks instead.
Many companies offer payment freezes on financial products such as mortgages to help people with sudden gaps in their budget because of coronavirus. Small, relatively affordable loans are also available from Community Development Financial Institutions (CDFIs) and the Credit Union.
The LGA also said that households awaiting universal credit payment may be entitled to a budget advance.
It said some municipalities are using data to intervene early by identifying and targeting people with low payment difficulties, while others have established discretionary hardship funds to help lower-income households with significant rent payment problems.
Simon Blackburn, chairman of the LGA’s Council for Safer and Stronger Communities, said: “We know that many people struggle to make ends meet during the corona virus crisis, but loan sharks should be avoided at all costs.
“These illegal loans usually have astronomical interest rates, quickly turn into uncontrollable debt that can never be repaid and are usually enforced through intimidation and violence.
‘Anyone with debt problems can first contact the municipality or the adviser, while charities also offer similar services.
“These will all focus on providing real help in the most affordable way, rather than illegal lenders who take advantage of other people’s misery and who should not be used for a quick cash fix.
“With the budgets of municipalities under great pressure, the government needs to ensure that local authorities have the necessary funding to support the needy.”