StepChange Debt Charity has identified that there is an urgent need to support the 300,000 households highlighted by the government as in debt to illegal money lenders, commonly known as ‘loan sharks’.
The government has announced that it will allocate more funding to tackle loan sharks and support credit unions. The work of the illegal money lending team is vital in addressing the “pernicious and criminal” activity of unlawful lending, which often takes advantage of households facing the greatest levels of financial need.
However, many households are drawn to the illegal lenders as legal credit often incurs high costs and interest rates. An estimated 1.4 million lower income households turned to high-cost credit to meet day-to-day living costs last year and, as a result of this, StepChange is urging government to support action on illegal loan sharks and on better alternatives to high-cost credit.
The charity acknowledges that signposting to credit unions is helpful, but states that credit unions are “unlikely to have sufficient capacity or resources to meet the full spectrum or scale of need”.
StepChange suggested that government consider a “wider framework” that covers those who may not be able to borrow from credit unions, as well as those who can.
StepChange Debt Charity head of policy Peter Tutton 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.”
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