More than one million people in the UK are victims of loan sharks, a figure significantly higher than previously thought, new estimates have indicated.

Analysis of data from the Swimming with Sharks report from the Centre for Social Justice (CSJ) by Freedom Finance, a supporter of the CSJ’s Debt Policy unit, suggested that around 1.08 million people could be victims of illegal lending.

Freedom Finance stated that mainstream lenders are surrendering people to loan sharks as victims try to access credit from legal, regulated sources but the vast majority see their applications rejected – leaving them nowhere else to turn.

Analysis of a dataset of 1,200 confirmed victims of illegal lending found that 38% said that they had attempted to secure credit elsewhere, but four in five (80%) were rejected.

The most common source of credit that victims tried to borrow from was a bank, with nearly half of victims (45%) who attempted to borrow choosing this option. The findings also showed that 66% of victims were already in debt to legal lenders.

Freedom Finance chief executive and CSJ Debt Policy Advisory Board member, Brian Brodie, said the report was a “wake-up call” for the industry in terms of increasing support for potentially vulnerable borrowers.

“The report from the CSJ lays bare the problem low-income households have in getting affordable borrowing products,” Brodie commented. “Hundreds of thousands are failing to access credit and as a result, have nowhere else to turn apart from predatory loan sharks to meet day-to-day living costs or unexpected expenses.

“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. We hope the FCA’s findings on how to help borrowers in financial difficulty later this year will provide further stimulus for action.

“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.”

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