We join the police to hunt down loan sharks at 100,000% interest

It was just before 7:30 am when two police vans and two unmarked cars pulled up on a residential street corner in Lancashire.

Five officers clad in stab-proof vests and wielding batons, jump down a narrow cobblestone path and cautiously approach a small house on the porch.

One of them blows on the door, while two stand behind him, armed with a plunger.

The other two are stationed in the back garden in case the two suspects try to escape. At first it looks as if someone has locked the front door.

But the officers quickly got inside and came out after only ten minutes escorting a tattooed man, muscle-bound and handcuffed.

The man, in his 30s, grimaces as he walks towards the back of a truck and drives away to nearby Köln police station.

I am witnessing one of about 50 raids carried out each year by England’s Illegal Money Lending Team (IMLT), a specialized branch of trading standards tasked with tracking down sharks. Wales and Scotland have their own divisions.

Teams have never been more in demand. With the cost of living crisis worsening, dozens of families are turning to credit cards and loans to face the high bills.

Just last week, Bank of England figures revealed that consumer borrowing has now returned to pre-pandemic levels, with £5.7bn of debt accumulated between January and May this year.

But an estimated 1.08 million people borrow from illegal lenders, according to the Center for Social Justice (CSJ) think tank. Many are struggling to make ends meet, are at risk and unable to get a loan or credit card from a bank.

CSJ data shows that four out of five debtors who tried to borrow from a regulated lender before turning to a loan shark were turned away by their bank or building society.

But these scammers routinely charge victims exorbitant interest rates of up to 130,000 percent, according to IMLT.

And fines for missing payments can be devastating, with some criminals threatening physical or even sexual violence. As prices continue to rise, experts fear more families could end up in the clutches of these scammers.

Matthew Greenwood, Head of Debt at CSJ, says: “People’s desperate need for liquidity is inexhaustible just because they don’t have access to it.

If someone is unable to access funds from a legitimate lender – perhaps because they have a poor credit score or because they need money quickly – they may turn to a loan shark.

The raid began last Tuesday with a two-minute briefing at Köln Police Station at 7.15am, and we gathered in a small conference room where five police officers and four IMLT members gathered around a large table.

Tony Quigley, the head of IMLT, explains that they have a search warrant for a suspected illegal lender, along with permission to use force to enter his property.

If he is at home, they intend to arrest him and then withdraw any possible evidence such as papers, computers, and cell phones.

In some raids, dogs trained to sniff out money are used, but not today.

Mr. Quigley concluded the meeting by saying, “What I hope this morning will pass fairly calmly, and the individual will co-operate and we will be able to do our work.”

It’s just a five-minute drive from the suspect’s home. Once caught, he would end up being interrogated for most of the day.

Meanwhile, seven IMLT investigators searched his property for evidence. There is a woman inside staring anxiously out the window and a dog is barking loudly. On the other side of the road, a neighbor is filming the scene on the phone.

The officers soon find something of interest in the trunk of his Jaguar sports car. An hour later inside the suspect’s home, they pulled out bulging bags of evidence.

The IMLT investigators can’t tell me what they found. But someone says they discovered around £20,000 in cash inside curtain rods in an earlier raid. On another occasion, they found £50,000 distributed between two boxes of jewellery.

Mr. Quigley tells me that sharks can pool anywhere from ten to 1,000 borrowers, making millions of pounds a year in inflated interest charges.

They usually lure victims through word of mouth. Some prey on people living in poor areas or co-workers, who may then recommend the illegal lender to another friend or relative in need of quick cash.

Many scammers also use social media platforms such as Facebook, WhatsApp, or Instagram to find potential victims, and may even phish dating apps.

Rufin Mavunga, 24, from Doncaster, was jailed for 16 months last year after using Snapchat to promote an illegal money-lending business.

If you take out a loan, you may then be added to an online group chat with other borrowers. Scammers use these to offer people more loans or harass them to make payments.

These days many are asking for debt payment via bank transfer but some are still going door to door to claim money owed. Others will go after the borrowers’ friends for money.

The CSJ found that a “small but significant” minority of loan sharks are violent and some have had convictions for rape, kidnapping and aggravated assault in connection with the debt.

Many borrowers who engage in mental abuse, and this can be the reason why it takes more than two years for the average victim to apply.

Mr. Quigley recalls an instance where someone asked his friend to pick up her children from school to avoid running into a loan shark.

But he intercepts them and ends up bringing them home, terrifying her. “They tend to find and grab any Achilles heel,” he adds.

Michelle*, 29, accepted a £50 loan from another mum on the school playground in 2020 after escaping an abusive relationship. At the time she was struggling to make ends meet after her work hours were interrupted. Soon, the former philanthropist was borrowing more.

Her largest illegal loan was £350 – and she ended up paying back nearly £2,500.

But she struggled to pay the interest and was threatened over WhatsApp and stones were thrown at her home. I got to the point of wanting to end it all, Michelle says. I was so suicidal I didn’t know who to go to. “

Eventually, mounting debts cause her to fall behind on her rent and lose her home just before Christmas in 2020. Michelle finally calls IMLT’s “Stop Loan Sharks” helpline. The case is ongoing but Michelle says: ‘Now life is completely different. Last year I could do Christmas shopping.

Many borrowers may not realize that they have used an illegal lender because scammers can forge papers to appear authentic.

There has also been a rise in loan scams, with criminals asking for an upfront fee and then never paying the promised money.

IMLT works closely with debt counselors, charities and housing associations to track down sharks. There is also a 24-hour helpline and online chat service where borrowers can report incidents.

Victims can also be added to a vulnerability logging service, so organizations are aware they have been targeted by sharks in the past and could be at risk of being contacted again.

“This kind of vulnerability is outside the realm of credit reporting,” says Helen Lord, chief executive of the database. “It doesn’t get picked up in normal operations. The fear of a loan shark is much greater than the fear of a court ruling or even a knocker on the door.”

It may take investigators anywhere from a few weeks to six months to gather enough intelligence to apply to the courts for a warrant.

Last year, only five loan sharks were convicted. The backlog of cases now means that anyone charged today is unlikely to face trial until 2024. Before the pandemic, about 25 illegal lenders were convicted each year.

Most of the raids were in the North West – and a good number of them were carried out in Manchester and Merseyside, as in this case, in Lancashire.

Experts say the gatherings often happened this way because they encouraged other victims who lived nearby to come forward. Those found guilty of illegal lending can be sentenced to up to two years in prison.

Mark*, 41, received a £2,000 loan from a colleague at the supermarket where he worked.

The father-of-two agreed to pay interest at 10 per cent a month but defaulted – and was told he owed £11,000, even though he had paid off most of the original loan by then.

“The loan shark kept showing up on my doorstep threatening me and my kids,” says Mark, who lives in London.

Mark finally sought help from Citizens Advice in 2018, about a year after he was offered the loan.

The illegal lender – who had about 30 other victims – was found guilty and given a suspended 18-month prison sentence.

Tony Quigley of IMLT says that freeing victims and entire communities from loan shark possession is always the main motivation behind what he and his team do.

To lend money legally, companies must be regulated by the Financial Conduct Authority. If this is not the case, the contract cannot be executed.

‘When you tell people the debt was illegal and they don’t have to pay it,’ Quigley adds, ‘that’s a real burden lifted on their shoulders. You really feel like you brought someone back to life.

f.parker@dailymail.co.uk

*Names have been changed.