LONDON–The United Kingdom is budgeting new funding to tackle unlawful lending, where payday loans and loan sharking are common, especially in lower-income communities. That includes funds that will go toward credit unions.
HM Treasury said it will spend more than £5.5 million on investigating and prosecuting illegal lenders, and supporting their victims. As part of the initiative, £100,000 already seized from loan sharks will be spent on encouraging people in England at risk of being targeted by loan sharks to join a credit union instead.
The National Association of British Credit Unions (Abcul) said it welcomed the announcement. Under the plan, £5.67 million in funding will be provided to Britain’s Illegal Money Lending Teams (IMLT) and bodies in Northern Ireland to take on the problem.
Matt Bland, Abcul’s head of policy and communication, said that credit unions were working with IMLTs across the country to encourage local people to come to them before going to any unlicensed lender.
‘Out of the Clutches of Loan Sharks’
“The extra money to promote the role of credit unions will help keep more people out of the clutches of loan sharks,” said Bland. “But credit unions have a broader role to play in providing an ethical and affordable alternative source of credit and savings facilities than simply in relation to the fight against loan sharks. We look forward to continuing our work with HM Treasury, the wider government and the regulatory authorities to expand credit unions’ important role.
“Figures so far show that the Lloyds investment has already had a six-fold leverage effect in terms of new lending by recipient credit unions which stood at almost £12 million for £2 million invested in September 2016,” continued Bland. “This demonstrates how targeted capital investment can radically boost the lending capacity of credit unions in communities that really need it.”
The Illegal Money Lending Team was created in 2004, and since then it has made more than 380 prosecutions and written off more than £73 million of illegal debt, according to the government. In Northern Ireland the initiative will be led by the Consumer Council, which will lead its first-ever education and awareness campaign targeting those who are most financially vulnerable. The Police Service of Northern Ireland (PSNI) will also get funding for a specialized officer who will lead on illegal lending within the Paramilitary Crime Task Force, the government said.