Loan Sharks - MABS Investigates
9th June 2021
In MABS we receive a lot of great questions about money matters and tackling debt. Questions that we know many people want to ask, but don't know who to ask or where to start. ‘MABS Investigates’ is here to help. In this series of blogs, we will answer these questions and “investigate” these topics, to bring clarity and break down the jargon.
The focus of this week’s ‘MABS investigates’ is Loan Sharks. There are a lot of unknowns about Loan Sharks and we are here to explain. Lending without a licence is illegal, and people who do it are sometimes called 'loan sharks'. Loan sharks often target communities or people when they realise they may need money or have limited options to access credit.People who lend illegally may not seem, initially at least, to be dangerous. In fact, they may seem to offer a solution when it's needed most. But remember, borrowing from a loan shark is never a good idea.
Keep reading to learn more about the pitfalls of borrowing money from a so-called loan shark. The tell-tale signs to be aware of if approached by a potential loan shark, and what to do. And the other options available to you to access credit.
- How do I know if I am borrowing from a loan shark?
- How do I report a loan shark?
- Illegal money lending and the law?
- I urgently need money and feel I have nowhere else to turn, what can I do?
All legal moneylenders must hold a licence and the Central Bank keeps a register(opens in new tab). If you are wondering whether the person who has offered you a loan is a legal money lender or a loan shark, you can contact the Central Bank of Ireland on 01 2246000.
Loan sharks work in different ways in different communities, but common tactics can include:
- Targeting you with an offer of a loan, at the shops or post office when you are collecting benefits. Other ways include through social media or online, where people can also be scammed through 'advance fee fraud' techniques(opens in new tab).
- Targeting younger people, older or someone they think might be isolated from other supports in a community.
- They will not usually offer you any written agreement about the loan (remember, even if they do provide an agreement, it has no legal standing as the money has been illegally lent).
- They will usually not ask for paperwork from you and make it seem easy to get the money or goods you need. Remember, as the saying goes, ‘if it seems too good to be true, then it probably is.’
- They may, however, require that you give them some form of security – such as your passport, driving licence or even your bank card.
- They may keep increasing the amount you owe or force you to keep borrowing to pay off what you owe. This means that the debt builds, and you have no hope of ever paying it off. This technique may, in some instances, mean you end up under their control.
- They may harass you by following you, standing outside your home, or phoning you repeatedly. This behaviour may lead to intimidation or threatening to harm you or your family. It may go as far as causing you actual harm.
If a lender is operating without a licence, you can report them to the Central Bank of Ireland on 01 2246000.
The law is there to protect you.
- As the loan shark is operating illegally – they can be prosecuted for this offence.
- As the money has been illegally lent to you – you are under no legal obligation to pay it back (but the loan shark is unlikely to let you walk away from the debt)
- No lender – whether legal or illegal - has the right to harass or intimidate you. Such harassment or using coercion (force) is an offence. If you are concerned about a threat to you or your family, you should report it to an Garda Siochana at your local Garda Station.
Suppose you are having difficulty in meeting the cost of essentials. In that case, borrowing is usually not the answer, and you may need the support of MABS. We can support you to maximise your income and get you to a position where you can manage your budget on a sustainable basis.
While borrowing from a loan shark might seem to solve the problem, it's never the answer and could put you or people you care about at serious risk.
If you need money for essential costs like food or utilities, there may be State support available to you, such as the Exceptional Needs Payment(opens in new tab) from the Department of Social Protection. You can make an appointment to visit your local INTREO office(opens in new tab) to find out more.
If you have an urgent and immediate need, you could consider charitable support. Many charities provide access to food banks and other supports for people with urgent needs. There is no shame in asking for help. These charities are available to help, and every day they are helping people just like you.
You may be able to talk about what is going on and the pressures you are under with a trusted family member or a friend. They may or may not be able to offer you some financial support, but it's still good to talk to someone who cares about you and who you trust to help you get a different view on your problem.
If your financial difficulties are caused by debts, you can no longer manage, there are also solutions available through Personal Insolvency. If you meet the eligibility criteria, you may be able to become debt-free with one of the many debt solutions available.Where you think borrowing is the right thing to do
If you think borrowing is the solution, only ever borrow from a regulated lender and only look for an amount that you can afford to pay back. It’s important to shop around for the cheapest interest rate. Resources such as Bonkers(opens in new tab) are a really helpful place to start.
If you're borrowing to meet the cost of a family event, like a religious celebration, back-to-school costs, or Christmas, then consider your options. Creating a spending plan is one way you may be able to cut back on costs. MABS is here to help you with this.
You may also be able to access State or charitable support. Remember, you're not alone in facing financial difficulties right now. Even though it may seem that things are getting 'back to normal', nobody expects things to be just as they were. So do things your way, based on what you can afford.
Most households need to have access to credit, and when you enter into a loan agreement with any creditor, it's important for you and them that you can pay it back. Creditors will use the information on the Central Credit Register (CCR)(opens in new tab) as part of their assessment in granting you a loan. If you miss payments on a loan, it will be recorded on the CCR and could have an influence on your future access to credit.Sources of credit Credit unions
Credit unions may be able to lend to you even if you are a new customer or have a poor credit history.
All credit unions offer small loans, and the maximum loan rate which a credit union can charge is 12% (12.68% APR).
Over 100 credit unions in the Republic offer the 'It Makes Sense Loan' (opens in new tab), a scheme aimed at credit union members or potential members who receive a social welfare payment. Existing credit union members can contact their participating credit union to apply for the loan. Those who are currently not members will need to join their local credit union before applying for the loan.Buy Now Pay Later (BNPL)
This is a relatively new form of finance, and you will see it advertised online and in lots of stores. It allows you to purchase an item and pay it off over an agreed number of monthly instalments. It is convenient and quick. However, for these reasons, there is a risk that you could spend more than you can afford. CCPC have more information about Buy Now Pay Later and in-store credit options. So it is vital that you fully understand the terms and conditions that apply. If you access funds over €500, this will be recorded on the Central Credit Register.Licenced Money Lenders
There are still many licenced moneylenders operating in Ireland, and while the cost is much higher than other forms of lending, this type of credit may be available to you when other forms are not. However, you should only ever consider high-cost credit when you have explored other options. Always check the Annual Percentage Rate (the APR is the annual rate of interest you will be charged on loan.) It takes account of all the costs involved over the loan term, such as any set-up charges and the interest rate – these can be very high and be sure you can afford these very high rates. You can check the Central Bank of Ireland's register for a list of licenced moneylenders.Never borrow from a loan shark.
Even if it seems safe and the person seems friendly or helpful, it's never a solution and may cause your debts to spiral out of control.
MABS is here to help
MABS know that many people face pressure paying for essentials from time to time or just have too little to get by; sometimes, they feel huge financial anxiety and immense emotional stress. We know this can be a challenging and lonely place to be. But we are here to help.
Depending on your needs, we'll support you to develop a spending plan to take control of your budget, and to access supports or entitlements. If necessary, we will negotiate with your creditors and tell you more about the options that could help you become debt-free. Our goal is to support you to secure your priorities – such as food, utilities and accommodation, the things you need for yourself and your household. To make sure that you have a budget that is affordable and sustainable for you. We will never judge you, and our service is free, independent and confidential.
Do you have a question for MABS Investigates? Get in touch and let us know firstname.lastname@example.org.
We hope this #MABSInvestigates blog was useful in helping you get to grips with loan sharks. We understand that sometimes you simply need a loan. We’d encourage you to be informed and money advisers from MABS are available to help. Call 0761 07 2000, talk to an adviser through our online chat(opens in new tab) or contact your local office.
Disclaimer: This blog does not represent legal advice and is intended for guidance only. If you are concerned about your current or future personal financial situation then please contact an adviser from MABS. Advisers are available by phone and email. You can call the MABS National Helpline on 0761 07 2000, Monday to Friday, from 9am to 8pm, WhatsApp 086 035 3141 (opens in a new tab) or find the contact details for your local office.