Page last updated at 06:50 GMT, Monday, 24 November 2008

Loan sharks tackled by money unit

Loan sharks can suddenly increase the amount a client repays without warning

Loan sharks who use violence and intimidation to get money from their clients could soon be prosecuted by an agency tackling illegal lending.

The All-Wales Illegal Money Lending Unit, set up in 2007, estimates at least 3m is borrowed from loan sharks each year, with 12m paid back.

The unit has investigated 35 cases of illegal lending since last year.

One victim told BBC Wales' Eye on Wales programme they and their family were threatened "every day and night".

The loan shark's client, who wanted to remain anonymous, thought initially the loan would solve their financial problems.

"At first I was very happy, thinking I've sorted my problem. For two or three months everything was okay," the person said.

They think they're coming to the end and the loan shark will say, 'I'll add on another 10,000
Steve Haye, illegal money lending unit

"After that people started to say, 'You are late with my payment - you need to pay more interest.'

"I started to worry a lot. I was threatened by these people, every day, every night. My family, my children were threatened. Every day there was more and more pressure."

The unit has been gathering evidence and is planning to bring its first prosecutions to court shortly.

Steve Haye from the unit said: "We have got evidence of violence being used, people being beaten up quite badly.

"We've also heard evidence of women being raped; firearms have been involved in some of the cases we're looking at.

"We've had examples where people have perhaps borrowed 1000, they've paid back 11,000 over a couple of years.

"They think they're coming to the end and the loan shark will say, 'I'll add on another 10,000.'

"That's the biggest thing for me. There is no end to your debt, as far as the loan shark is concerned, it's just when they feel like letting you go."

Patrick Kiely
Patrick Kiely charged 100% interest on loans, his trial was told

In September, illegal money lender Patrick Kiely, formerly of Bangor, was convicted of running a money lending business without a licence and jailed for two years.

Mold Crown Court heard Kiely charged an annual percentage rate (APR) of up to 149,000% and had loaned more than 130,000 to people across north Wales.

Det Con Philip Williams from North Wales Police's financial investigation unit took part in the investigation into Kiely's activities.

"He was charging an immediate 100% interest rate. If you borrowed 400 from him, straight away you owed him 800," he said.

"If a customer failed to pay, which happened quite often, then he added a penalty charge.

"Some customers were forced to take out second loans in order to pay back the first loan, so effectively they were paying four times the amount back."

Oxfam Cymru has gathered research on how residents in disadvantaged areas of Wales are affected by lack of access to credit.

Alan Bull was one of the researchers who looked at deprived areas of Cardiff.

"We found a hell of a lot of people were in debt and they were paying extortionate rates of interest - in many instances to illegal money lenders," he said.

"People will always need access to loans. The fact that there is that bottom rung of the loan ladder available to people in debt says something about society.

"If those people are allowed to operate and make extortionate profits on the backs of the poorest people in our community, then it's an indictment on our society at large."

Eye of Wales is broadcast on BBC Radio Wales on Monday at 1830 GMT.

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