New analysis shows mainstream lenders surrendering victims to loan sharks

Mainstream lenders are surrendering people into the hands of illegal loan sharks as many victims try to access credit from legal, regulated sources but the vast majority see their applications rejected leaving them nowhere to turn except predatory illegal lenders.

Analysis of the CSJ’s dataset of 1,200 confirmed victims of illegal lending in its Swimming with Sharks report by Freedom Finance (a supporter of the CSJs Debt Policy Unit) demonstrates shortcomings of the lending industry, with 38% of loan shark victims stating that they had attempted to secure credit elsewhere. However, four in five (80%) of these were rejected.

Further analysis of FCA data reveals many people are also deterred from applying for credit altogether – more than one in 10 people with at least one consumer credit product decided against applying for a loan in the past year because they were afraid of being rejected, a proportion that rises far higher among those with characteristics of vulnerability (eg, 42% among those with low financial resilience). Of those deterred from making an application, nearly half (48%) said they felt there was no point.

Brian Brodie, Chief Executive of Freedom Finance and CSJ Debt Policy Advisory Board member, said it was a wake-up call” for the lending industry to increase support for potentially vulnerable borrowers, particularly ahead of a cost-of-living crisis, commenting: “This is an industry problem as much as a social problem as a large number of the victims are already customers of our industry who were not able to get the support they need.

“The withdrawal of many alternative, short-term providers of credit pulled up the ladder above what the regulator might term “high-risk” borrowers. This is now being filled by illegal money lenders as lenders wash their hands of a responsibility to provide fair access to credit for all.”