A new research conducted by Lancaster University has uncovered the dangers of people resorting to unofficial lenders due to the rising cost of living. The findings of this research were recently presented in a special session held in the House of Commons.
The report reveals that being declined for credit often leads individuals to seek illegal lenders in the UK. On average, people were borrowing £3,000, typically in amounts of hundreds rather than thousands of pounds at a time.
This research sheds light on a harmful consequence of financial exclusion.
The study was conducted by specialist researchers, We Fight Fraud, in collaboration with Dr. Nicola Harding from Lancaster University. They interviewed eight illegal lenders and 287 borrowers to understand their experiences and the ease with which they accessed illegal lending in their communities.
The research uncovers a “subterranean world” where a certain group of individuals is well aware of where and how to access small amounts of credit. The lenders rarely inquire about their borrowers’ ability to repay, and borrowers themselves are aware that the lenders are operating illegally.
The research states, “They are phlegmatic about this. It is a means to an end—to access cash. They face intimidation and threats to repay, but in many cases view this as an occupational hazard. The potential harms are significant.”
Although actual violence was found to be rare, the constant threat of violence was prevalent.
The research also uncovered the following key points:
- The shrinking non-standard subprime market has created opportunities for illegal lending
- Debt plays a unifying role for those borrowing from illegal lenders
- Lower-wage full-time employees are more vulnerable to illegal lending
- This shift may be connected to the decline in doorstep lending
- The ability of illegal lenders to provide the full amount of funds requested was a deciding factor for borrowers
- Limited offline access to financial products could contribute to some individuals resorting to illegal lenders
Dr. Harding commented, “We conducted this research between June and December 2022, just as the impact of the rising cost of living crisis was beginning to be felt. As the study progressed, we observed an expanding demographic of clients using illegal moneylenders.
“Average wages have increased to between £20k and £25k per year, and more clients of illegal lenders are in full-time employment than ever before. This suggests a significant link between the increased cost of living, the withdrawal of home credit and subprime lending opportunities, and the rise of illegal lending.
“What is even more concerning are the connections we discovered between illegal lending and serious financial crimes such as money laundering and the potential for terrorist financing.”
Citation:
UK Researcher uncovers the subterranean world of illegal moneylending (2023, June 28)
retrieved 28 June 2023
from https://phys.org/news/2023-06-uk-uncovers-subterranean-world-illegal.html
This document is subject to copyright. Apart from any fair dealing for the purpose of private study or research, no
part may be reproduced without the written permission. The content is provided for information purposes only.
Denial of responsibility! SamacharCentrl is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
Shambhu Kumar is a science communicator, making complex scientific topics accessible to all. His articles explore breakthroughs in various scientific disciplines, from space exploration to cutting-edge research.
