Appendix 2 - Illegal Money Lending Report - Stockton-on


Appendix 2 Illegal Money Lending – “Stop Loan Sharks” Summary

This report provides background information on the Council’s partnership with the England Illegal Money Lending Team (IMLT) and the ‘Stop Loan Sharks’ project aimed at protecting the vulnerable from illegal money lending.


1 Historically, illegal money lending, although widespread in deprived communities, has been a largely invisible and little understood crime in the UK with few authorities having the necessary resources to enforce the law effectively, leaving victims isolated, vulnerable and with little means of redress. 2 3 A pilot Illegal Money Lending (IML) project was launched in 2004, as part of a wider strategy to tackle over-indebtedness and financial exclusion. Following the success of the pilot project and research commissioned by the then Department for Trade and Industry which provided the first estimates of the scale and impact of the problem, the national IML project was established in late 2007. The national project has been managed by the Department for Business, Innovation and Skills (BIS) since its inception and currently uses an England based Illegal Money Lending Team (IMLT) based in Birmingham. Members may recall that on 17 th March 2011 Cabinet agreed that:  the delegation of the function of the enforcement of Part III of the Consumer Credit Act 1974 be carried out in Stockton Borough Council area by Birmingham City Council and delegate the power of prosecution to Birmingham City Council for any matters associated with or discovered during an investigation by the illegal money lending team.  t he “Protocol for Illegal Money Lending Team Investigations” is agreed and authority is delegated to the Trading Standards & Licensing Manager to enter into the agreement on behalf of Stockton Borough Council and approve minor alterations if required. 4 The benefit that partnering with the IMLT has brought to Stockton is significant. Stockton Trading Standards & Licensing Service, like most local authorities, is not able to provide the level of specialist resource to provide this function. This is an excellent example of how sharing resources on specific issues can bring benefits otherwise unavailable in providing 5 support to vulnerable consumers and tackling rogues.

Stop Loan Sharks

Nationally the Stop Loan Shark Project have identified over 2,100 illegal lenders, has secured 293 prosecutions for illegal money lending and related activity, leading more than 176 years’ worth of custodial sentences. They have written off £40.3 million worth of illegal debt and helped over 22,000 victims.

Illegal money lending – some background statistics

6 National statistics show:  An estimated 310,000 UK households are using illegal money lenders  People in the UK repay £120 million per year to illegal money lenders  Victims most likely female, aged 30 - 40, on benefits, living in social housing  Illegal money lending is concentrated in deprived communities in society  Only a minority (3/10) of borrowers have chaotic lifestyles (e.g. drug/alcohol abuse or gambling problems), the rest have exhausted legal credit options or are targeted by loan sharks.

What is a loan shark?

7 A loan shark is someone who lends money to a number of people, without the licence require by the the Consumer Credit Act 1974. These licences are issued by the Office of Fair Trading to individuals or companies who they believe are 'fit and proper'. Typical characteristics displayed by loan sharks.        No credit agreement given -'you owe me this today'; No receipts for payment or payment books; Violence or intimidation (or threats of such) if repayments are missed; Loans or young people (under 18's); Can take illegal securities e.g. cash card; Never advertise - find clients by word of mouth; and Repayments of at least twice the amount lent, often with high charges for defaulting 8 There are lots of myths around loan shark activities eg:


- You have to pay back what the loan shark says you owe


- A loan made by an illegal money lender (without a license) is unenforceable without a validation order for the Office of Fair Trading. This means that you cannot legally be made to pay it back.


- The person is my friend, they have helped me out when times have been tough.


- Friends do not make unreasonable demands. Use intimidation and threats to obtain money.


- If you borrow from a loan shark, you commit an offence.


- It is the loan shark who is behaving illegally. Reporting the loan shark's activity will not get you into trouble with the authorities.


- Illegal money lending is a victimless crime


- Clients of illegal money lenders are often intimidate into paying back substantially more that they borrowed with threats of violence common. Whole communities are affected by their activities, as residents may be forced to turn to crime to enable them to pay back the inflated loans. Loan sharks are often linked to other criminal activity such as drug dealing and counterfeiting.


- Loan sharks provide a reasonable priced service


- The average cost of borrowing from a loan shark is three times the price of the highest cost of legal credit. The highest interest rate the team have come across so

far was 131 ,000% APR. One victim was receiving benefits of £74 per week. The loan shark took £50 a week, leaving them just £24 to live on. 9 The IMLT can be contacted 24 hours a day, seven days a week on :-  telephone - 0300 555 2222  e-mail: [email protected]

;  by text to: loan(space)shark(space) + your message to 60003; or  private message on

How can we ensure that everyone is aware of this project?

10 The IMLT is encouraging partners to de velop a “Stop Loan Sharks Charter” for their area. The Charter is a device for bringing people together to create a cohesive community statement that loan sharks will not be tolerated in local communities. The aim is to bring together leaders from the local authority and other key organisations, which deal with victims 11 of loan sharks to make a stand against illegal money lending and send a clear message that they are united in a zero tolerance approach to this crime. A potential draft charter for Stockton is attached as

Appendix A

and further details of the support available f or all organisations interested in taking part in the ‘Stop Loan Sharks’ project are included at

Appendix B


Name of Contact Officer: David Kitching Post Title: Telephone No.: Trading Standards & Licensing Manager (01642) 526530 Email Address:

[email protected]

Appendix A

Stockton ‘Stop Loan Sharks’ Charter

Stockton Partners’ Agreement

This agreement is aimed at tackling any issues of illegal money lending in Stockton. The England Illegal Money Lending Team aim is to prosecute unlicensed lenders in Stockton. Stockton partners recognise that effectively tackling loan shark behaviour leads to safer communities and neighbourhoods for Stockton residents.

The aims of the Stockton ‘Stop Loan Sharks’ Charter are to:

1 Increase awareness within local communities of the approaches and tactics that illegal loan sharks adopt when targeting potential victims 2 3 4 Create a legacy that will make Stockton a difficult pace for loan sharks to prosper. Increase the financial capability of Stockton residents so that they can make informed financial choices on areas such as affordable lending and saving. Increase the confidence of Stockton residents to enable them to report illegal loan shark activity safely. 5 Increase the awareness of multi-agencies working with Stockton residents to enable staff to spot signs of a loan shark victim and then offer the victims the opportunity of support.

We agree to achieve this by:

1 2 Promoting the Stockton’ Stop Loan Sharks’ Charter as widely as possible and encouraging Stockton organisations to sign up to this Charter. Plan and implement initiatives to engage and empower local communities to speak about 3 4 illegal loan shark activity. Create opportunities to offer financial capability tools to local communities so residents can make informed financial choices. Take a multi-agency approach to facilitate the Illegal Money Lending Team in increasing their reach into local communities.

Appendix B