It started with Christmas. Sarah* was behind on rent and her money wouldn’t stretch, but she didn’t want her kids missing out. She turned to a local moneylender – ‘a friend of a friend’ – and borrowed £700. She would repay £1,200 in total, split into installments of £200 per month. Interest was high, but with bad credit and no relatives she could turn to, she didn’t have many options.
“I was desperate,” said Sarah, 39. “Everything had piled up – rent, bills – and we were living hand to mouth. It was before Christmas and I just knew I couldn’t do it.
At first everything was fine: the lender would come to her house and collect her £200 each month, recovered from Sarah’s work in hospitality and Universal Credit. But when the third refund was due, it turned around. The moneylender was with two men she had never met before and wanted all the money. “I said, ‘I can’t afford this. We will have nothing left,” she said. “But he said, ‘That’s not my fucking problem. Do you think I care? My heart was on the ground. I did not know what to do.
The mother-of-four is one of thousands of people across the UK who are turning to loan sharks – illegal moneylenders who offer informal loans without paperwork, often at high interest rates. In some cases, they use threats and coercion to get their money back, sending harassing text messages, taking bank cards to intercept benefit payments or going late at night to demand money on the spot.
Events often turn violent. When Sarah said she couldn’t pay, she was attacked outside her door in front of her children. “He started getting aggressive,” she said. “I knew I couldn’t fight him; I had no chance. I ended up shouting “OK, OK”.
She managed to pay off the debt – increased to £2,000 due to ‘delays’ – after handing over her Universal Credit, selling some possessions and going to the community center for help.
But, two months later, she is traumatized.
“Mentally it destroyed me,” she said. “Children are afraid in their own house. I feel like a terrible mother for what I brought to my door.
The true extent of illegal money lending is not known. While before the pandemic, 310,000 households were thought to be affected, many cases go unreported, according to Cath Williams of the Illegal Money Lending team. But it is a growing national concern. In recent months, charities and community centers have seen an increase in the number of people asking for help, some of whom have turned to loan sharks to pay for school uniforms and food as well as rent and bills.
Last month the Chartered Trading Standards Institute warned that the difficult economic environment had created a “perfect storm” for loan sharks and scammers. And data from Citizens Advice shows an increase in the number of people in need of food bank support, with the charity making 25,441 referrals in January and February 2022, a 26% increase on the previous year. . Grant applications for other essentials, such as clothing, also increased by 46%, while applications for energy debt assistance increased by 33%.
Esther Iyobebe, a financial mentor with the Money A+E charity, which runs community education programmes, said she had heard increasing reports of loan sharks in London.
“Before, it was Wonga. It is now an underground movement. They say, ‘Oh, I heard from a friend that you might need some help,'” she said.
It’s not always money. In one case, a woman bought a washing machine from an informal hire-purchase dealer and is now being harassed for refunds. “You pay three times as much,” she said. “It’s a trap.”
Gerard Woodhouse, managing director of the L6 community center at Everton, said illegal loans were “commonplace” at Liverpool. “It’s worse here than the drug trade,” he said. “People don’t borrow money to buy drugs, except the weird. People borrow money to survive. It’s electricity, gas, nappies, people who need school uniforms.
The center has supported 15 people in difficulty with loan sharks since the start of the year, he said – compared to 12 for the whole of 2021.
Now Woodhouse fears that the rising cost of living – with food and fuel prices soaring, energy bills and a National Insurance increase taking effect next month – means things could get worse. .
“People can contact the council for help, but you only get one bite of the icing,” he said. “They can’t get standard loans and they get minute bills. May God help us when April comes.
*Name has been changed