Our comment on loan shark crackdown
25 April, 2018
We welcome the government’s announcement today of more funding to tackle loan sharks and support credit unions. The work of the Illegal Money Lending Teams is vital in addressing the pernicious and criminal activity of unlawful lending, which all too often takes advantage of households facing the greatest levels of financial need.
There is an urgent need to support the 300,000 households identified by the government as in debt to illegal money lenders.
But the wider issue of legal high cost credit should not be forgotten, either. An estimated 1.4 million lower income households turned to high cost credit to meet day to day living costs last year. So the charity urges the government to support action both on illegal loan sharks and on better alternatives to high cost credit more generally, with a renewed commitment to ensuring people in financial difficulties have viable options that will put them on a more sustainable footing.
While increasing signposting to credit unions is helpful, the charity says that credit unions alone are unlikely to have sufficient capacity or resources to meet the full spectrum or scale of need. The government needs to consider a wider framework covering those who may not be able to borrow from credit unions, as well as those who can.
Solving the problem, and providing a sustainable alternatives to both illegal and high cost lending, requires additional government support, and creative approaches such as those put forward in the charity’s recent report on better alternatives to high cost credit.
Peter Tutton, StepChange Debt Charity head of policy, said:
“Cracking down on the unconscionable activities of loan sharks is a very welcome step. It needs to be accompanied by a twin-track focus on the high cost credit market more generally, to reduce the harm being experienced by vast numbers of households who are forced to borrow to make ends meet. Now is the time for the Government to explore creative, sustainable alternatives to meet the needs of financially vulnerable households.”