Consumerline - News

Consumers advised to avoid loan sharks - 02/12/2008

Trading Standards Service are advising consumers to avoid using illegal money lenders as a way of funding Christmas.

Consumers, anxious over the cost of Christmas, are being urged to avoid illegal money lenders as a means of finding funds.

The Department of Enterprise, Trade and Investment's Trading Standards Service is advising consumers, who are unable to access credit through the usual mainstream channels such as bank loans, credit cards etc, not to resort to illegal money lenders.

Illegal money lenders, or 'loan sharks' as they are more commonly known, are unlicensed and operate outside the law. It is a criminal offence for a person or business to engage in activities that require a consumer credit licence when they are not a licensee.

Because they are not licensed, 'loan sharks' operate unlawfully. If an individual borrows from a loan shark it is likely that they will:
· get a loan on very poor terms;
· pay an extortionate rate of interest;
· be harassed if they get behind with their repayments;
· be pressurised into borrowing more from the 'loan shark' to repay one debt with another.

Jimmy Hughes of Trading Standards said: “The best advice for dealing with 'loan sharks' is 'don't'. They're unlicensed moneylenders who charge very high interest rates and sometimes use threatening behaviour and violence to frighten people who cannot repay their loan.

"If an individual has borrowed money from a 'loan shark' there is no legal obligation to repay the debt as the loan is unenforceable. If a lender is not licensed by the Office of Fair Trading (OFT) then they have no legal right to recover the debt.

"Loan sharks sometimes frighten people by saying they will be prosecuted and even sent to prison if they do not pay up. This cannot happen. Not repaying a loan from an unlicensed lender is not a criminal offence. Any lender, licensed or unlicensed, who harasses a consumer is breaking the law. Consumers should report any 'loan shark' to the PSNI if the 'loan shark' is threatening or uses violence."

Trading Standards Service offers the following advice to consumers contemplating using 'loan sharks':

· Check to see if a lender is licensed - the Consumer Credit Public Register lists everyone with an OFT licence as well as everyone who has applied for one or has had one taken away or suspended. Basic information from the register is free, including trading names and the activities for which a business is licensed. To search the public register, telephone 020 7211 8608.

· If you need a loan, always go to a licensed lender. There are reputable lenders who will consider lending to you even if your income is low, your credit rating is poor or you only need a small amount for a short while. You may still have to pay a high rate of interest but the Consumer Credit Act 1974 will cover your loan agreement.

· If you are on a low income and you need to borrow a small amount for a short time, look into borrowing from a Credit Union. Credit Unions encourage you to save what you can and only borrow what you can afford to pay back.

· If you are asked for your benefit book as security for the loan then it is likely that the lender is a 'loan shark'. Licensed lenders would not ask for your benefit book.

· Always shop around for credit, just because a lender is licensed it does not necessarily mean you are getting a good deal.

· If you are in debt and need help contact your local Citizens Advice Bureau (CAB) or Independent Advice Centre for free advice. They provide free information and advice on legal, financial and other problems. Many organisations offer free help and guidance on money matters. Always get free, independent help before you pay a commercial service.

If consumers have a complaint about 'loan sharks', please contact Consumerline on 0845 600 62 62/028 9025 3900 or log on to www.consumerline.org

« Go Back