Taking a bite out of loan sharks

Paul Nicholson amassed a £4.3m fortune through loan sharking

The hallmarks of intimidation were everywhere when police raided the house of a suspected loan shark.

The knuckle duster, the machete, the notebooks full of lists of who owed how much and where they lived.

For one victim, who asked not to be identified, the loan shark's solution to her inability to keep up with his growing demands for repayment was straightforward.

He told the woman she could prostitute herself while her children were at school.

"He said, 'I can get men to come and visit you at home when the children are at school... and they won't pay you they will pay me and it will come off your debt'," she told Panorama's Simon Boazman during an interview about being in debt to notorious Cheshire loan shark Paul Nicholson.

The woman was one of Nicholson's 890 customers spread across some of the country's poorest estates. She took out £1,500 worth of loans from Nicholson, only to have him demand a repayment of more than £15,000.

"His favourite saying was 'pay me, don't feed your children'."

The threats of him selling the debts on to another family started coming. And the family he would sell the debt on to would put your windows out, break your legs, anything Debbie Wilson, loan shark victim

In March 2008, Nicholson was raided by Trading Standards' Illegal Money Lending Team and Cheshire Police. He was arrested and later convicted of blackmail, rape and assault. He is now serving an indefinite sentence.

Nicholson was one of a series of loan sharks targeted by police and trading standards officers in a crackdown on a ghost industry that hit the boom time as the recession saw legal lending to marginal, high risk clients drying up.

The teams targeting loan sharks were set up five years ago and have led the prosecution of almost 100 loan sharks since, freeing victims from an estimated £30m of illegal debt.

It is estimated that as many as 200,000 people in Britain could now be in debt to loan sharks, filling a void left by legitimate lenders who deal in high-risk cash loans who have tightened their criteria.

Tony Quigley of the Illegal Money Lending Team said: "There no two ways about it, it's big money and people with criminal lifestyles are moving into it, because it's big money.

"Previously it was risk free, it isn't risk free anymore, we are identifying them and we are removing them."

'Friendly loan'

Debbie Wilson, of Stanley, Co Durham, is another victim of loan sharks.

What at first seemed like a friendly loan from a neighbour of £500 to buy Christmas gifts for her family turned into a seven year ordeal that saw her family pay loan shark Robert Reynolds nearly every penny they could earn.

"We were just barely feeding the kids and me and me husband just living on toast so that the kids could have a decent meal."

Robert Reynolds still lives steps away from his victims

In the end, Mrs Wilson handed over a staggering £88,000 to Reynolds as the threats escalated.

"The threats of him selling the debts on to another family started coming. And the family he would sell the debt on to would put your windows out, break your legs, anything."

Mrs Wilson finally turned to the police and Reynolds admitted harassment and was given a 51-week sentence, suspended for two years.

He still lives around the corner from Mrs Wilson, who he has been banned from contacting.

'Legal' lenders

Panorama has also learned that the Office of Fair Trading (OFT) - which has the role of determining who is fit to be a legal, licensed lender - does not carry out full automatic criminal record checks on licence applicants, even those it considers to be high risk.

Anyone who extends credit requires these consumer credit licences, including legal high risk lenders - known as "doorstep lenders" - which extend credit to people unlikely to obtain loans from banks.

While the OFT does have limited conviction information, it can only apply for a full criminal check if it believes the applicant has provided them with false or inaccurate information.

Paul Nicholson, who suggested that his victim resort to prostitution, gained the veneer of respectability by obtaining a Consumer Credit Licence.

When Nicholson was granted a licence, he already had criminal convictions, but was able to get around OFT checks by not declaring these convictions on his application.

The OFT has no way of knowing how many of the 120,000 people it has already issued consumer credit licences to have criminal convictions.

Panorama: Swimming with Loan Sharks, BBC One, Monday, 16 November at 2030 GMT.