Fighting illegal money lending, with Catherine Wohlers

Last time the research was done in England, 1.1 million people were borrowing from illegal lenders... and that was two years ago, before the cost of living crisis which has surely pushed that number higher, so we're looking at somewhere between 1 in 30 and 1 in 40 adults. Those borrowers are facing a combination of threats and extortionate rates, and you're losing directly, too, because "if one of your customers is paying the loan shark, they won't pay your loan because the loan shall be the priority". 

Stop Loan Sharks is at home online at https://www.stoploansharks.co.uk/

But it also just happens to be one of their bi-annual social media weeks, so why don't you also engage with their posts on LinkedIn https://www.linkedin.com/company/stoploansharksengland/

I am on LinkedIn, too, and open to new genuine connections - https://www.linkedin.com/in/brendanlegrange - please also follow the show's page while you're there.

Meanwhile, my action-adventure novels are on Amazon, some versions even for free, and my work with ConfirmU and our gamified psychometric scores is discussed at https://confirmu.com/ and on episode 24 of this show https://www.howtolendmoneytostrangers.show/episodes/episode-24

And finally, I'm also co-creating a new podcast called hAIghtened senses which will look at the intersection between human senses and technology, especially AI-powered technology. You can already start to follow it wherever you're listening to this one - there's only a trailer there at the moment, but we've recorded some of the early episodes and it's going to be a fun ride!

Keep well, Brendan

The full written transcript, with timestamps, is below:

Cath Wohlers 0:00

If one of your customers is paying the loan shark, they won't pay your loan because the loan shall be the priority. The threat has been witchcraft - so you know, I'll put a curse on you and your family - or I'll break your legs or I'll tell your partner about the loan or I'll tell your boss to watch you because you might have your hand in the till because you owe me money.

We've seen APRs in excess of 130,000%. Some will just carry on extorting money out of you because you can't say no to them. But at the same time, nearly half the people we helped last year thought that loan shark was their friend. So even if you have got access to credit, if your mate is offering to lend you money to help you out, you might choose that as the option.

Brendan Le Grange 0:41

One of my very favourite places in the world is this little island off of Coron in the Philippines. My wife and I discovered it when our oldest child was only a few months old, and we loved it because the beach huts was so close to the shore that we could put our daughter to sleep in a crib, hire a babysitter and walk out pretty much straight on to the greatest reef I've ever seen in my life.

I've done a fair amount of scuba diving in the region and to be honest, I haven't seen anything fully geared up that matches the richness of this place. We've swum through those giant balls of bait fish, we've seen barracuda, squid, cuttlefish, right up close, turtles, a little stuff too, clams nudibranches. On one trip, my wife and I were doing shifts one of us was playing with our daughter in the shallows while the other one swam out further to explore. When my wife came back from her turn, she told me she had seen a shark. So I swam out to see if I'd see it, too.

The sea was quite churny that day, so the water was murky... and maybe we shouldn't have done this, but I did see the shark and it was incredible.

Now this was a black tip reef shark, so almost as tall as I am but completely harmless. Still, when you see that silhouette, and you see that fin coming out the water, there's a real primal reaction that gets the adrenaline going. We spent that whole weekend with the shark. And one of my fondest ocean memories will always be a 30 minute session I still remember vividly where I was just paddling along on the surface head down watching the shark gently cruise along the length of the coral reef.

But not all sharks are so friendly, welcome to How to Lend Money to Strangers with Brendan le Grange.

Cath Wohlers, this show is called How to Lend Money to Strangers so clearly, I love a longer than normal name that explains exactly what something does so let's start right there: who is Stop Loan Sharks? What is its goal? And what is your role within the organisation?

Cath Wohlers 3:05

Sure, so to Stop Loan Sharks is the England illegal money lending team, but that's too long for me and I think it makes it sound like we lend money illegally, which we don't, what we do is stop loan sharks.

So we are an English based team funded through the Treasury from a levy that's on the legitimate credit industry. It's about 60 of us in the team, and we identify, investigate, and prosecute loan sharks. But at the same time as doing that we want to support the victims and communities who are affected by illegal lending. And also where we can stop people from using loan sharks in the first place.

So very much a team of two halves. We've got investigators who go out arresting the bad guys. And then the team that I manage, we do Victim Support, witness support, lots of prevention work, and just trying to raise awareness and say to people, you know, this is what a loan shark might look like in your community, this is why you need to avoid them, this is what else you could do.

Brendan Le Grange 3:54

Yeah, I've worked in lending for 20 odd years now. And we've always had loan sharks as kind of a caricature of something that's out there. But I don't think I've ever actually explored the topics I'm really interested to get into that. When I lived in South Africa, you'd often see on lampposts, these coloured printouts that somebody had made at home, offering cash loans, no credit checks, a kind of a number to WhatsApp. Now, those people had terrible reputations from time to time, you might see a story in the newspapers about sort of taking people's bank card and they put it in holding their security, things like that. But yeah, that was 20 years ago, and on the other side of the world. So what does a loan shark look like? In reality in today's world, and in particularly in the UK?

Cath Wohlers 4:38

I think the problem is there could be anybody.

We've seen loan sharks where there are links to organised crime, so where they're almost laundering the money from other criminality through the community by giving it out in loans, and they could be nasty, they could be the kind of baseball bat wielding thugs that maybe the phrase conjures up.

But that's probably about five 10% of what we deal with. There is a big spectrum of illegal lending which includes things like migrant nurses, we've prosecuted who working in hospitals and lending to people from the same community from them back home, we've prosecuted people in their 70s, sometimes in use to work for legitimate lender and then carried on lending money of their own after they retired community based lenders who lend from the school gates or the workplace or a pub, and the threats are more about maybe shaming the community or telling people you're a bad data or putting something on Facebook or telling your partner about the loan if they don't know about the loan.

But there's always an element of financial ripoff. And then there's always an element of control.

So in terms of the rip off, we've seen APRs and accessible 130,000% being charged. You know, one of my worst case scenarios, a chap who borrowed £250 and he paid back £90,000 over 17 years for that loan, because the loan shark had control of him. And that's where the threat comes in.

And it's always individualised, almost tailored, so we've had threats where the threat has been witchcraft in the Ghanaian community. So you know, I'll put a curse on you and your family, we've had threats of outbreak, your legs will have threats of I'll tell your partner about the loan, or your kids go to school, but my kids, you wouldn't want people to stop playing with them. Or I'll tell your boss to watch you because you might have your hand in the tail because you owe me money. It varies from loan sharks to loan shark comparison to person but there's always there's kind of two elements the financial rip off, and then the element of control.

Brendan Le Grange 5:51

Yeah, I mean, that's a really sketched the horrific human cost of some of these and how quickly that Desperation can say to end when 200 becomes 10s of 1000s, hundreds of 1000s of pounds. But if you put this in context of overall numbers, both in terms of victims, and also in terms of how much money is involved here.

Cath Wohlers 6:41

It was an England study, I think it was done two years ago, so that's the latest figure, we have research by the Centre for Social Justice, who are a think tank here in England. And the figure they came up with was 1.08 million people in England using loan sharks, and that's 2% of the population. That was before the cost of living crisis really kicked in so we don't really know what's happened since that, that could almost be the baseline, if you like.

In terms of how much it costs. We don't know some loan sharks charged double bubble, where you pay back twice what you've borrowed, some will just carry on extorting money out of you, because you can't say no to them. So it really does vary from from loan shark to loan shark, the average loan shark will probably have between 20 and 80 people on their books, and they'll make enough money from those people to make a significantly good living. You know, someone we arrested last year, we arrested him in July, he'd been on seven holidays that year already off the back of his illegal ending, whereas his victims literally were living off cornflakes. And they had nothing.

Brendan Le Grange 7:38

Yeah, it really sounds like these elements that we think are from the movies of having the mafia boss do a favour for you, and then having to pay that back over and over and over again. But instead of being this big, scary mafia boss that you know, to avoid, as you say, these can be work colleagues, these can be parents of kids at your school, these can be people trusted within the community.

So what I wanted to talk a bit about is what this means from a lending point of view, because obviously, this show primarily speaks to lenders. And when we start talking about loans on the riskier end of the market, especially, you know, if people are pushing back about the rates we're charging, or the steps we're taking, will hear something along the lines of well, if they don't borrow from us, they'll end up with a loan shark.

And sometimes that's a cop out, it feels like that the illegitimate lending industry just dangles the threat of a loan shark out there to help sway a regulator towards their wishes. But also sometimes it's obviously true. So how do lenders strike that balance in helping to keep customers away from predatory and unregulated lenders without at the same time letting that justify their own bad loan practices?

Cath Wohlers 8:53

I think it's really difficult because I think one of the things that we struggle with as a concept is what do you do when someone can't afford the loan, and no one can lend to you at any interest rate, because you'll end up with the ombudsman, you'll end up with the loan being written off?

An awful lot of the people we work with have negative budgets, they would not qualify for a loan from anywhere. So no one no matter what their lending policy was, we'll be able to lend to them in terms of the kind of high cost credit market and the idea that you know, if you don't have that peep, more people will use loan sharks.

There was some work done by an organisation called Polisis and they looked at the Japanese market where credit was was regulated. It's quite a high standard. And what the lady Amul Allison, who did that research claimed was that it took seven years for the loan sharks to emerge. She said, what happened was the people did without, so if it was for a new car, or a holiday or whatever they went without. And then at the point at which they were looking for credit for things like food and fuel or things they needed, they went to family, and by the time they've exhausted that as a method of lending, it was seven years.

So I think one of the problems is there's not a very clear cause and effect when people are making this argument. It's not like the high cost credit lending market halaves and four weeks later, there are twice as many loan sharks.

One of the things we know from our victims is an awful lot of them haven't tried to get credit from elsewhere. It's not that they've gone down the credit ladder and ended up at the bottom, they actually haven't tried to get credit for elsewhere, because it's not for the "likes of me" or they've tried 10 years ago and would declined, and nothing's changed in their situation, so they don't think they would lend now.

But sometimes people have got access to credit. And they still borrow from loan sharks, because nearly half the people we helped last year thought the loan sharks weretheir friend.

So even if you have got access to credit, if your mate is offering to lend you money to help you out, you might choose that as the option. So I think, you know, there's there's all sorts of different factors that play into the worlds of loan sharks. But obviously, where there are no alternatives, that does leave a bigger gap.

Brendan Le Grange 10:44

You know, what I think that means for lenders, legitimate lenders in the market is, you know, a chance to think about their offerings to these marginal areas of the community. I mean, I think it speaks to a lot of failings and gaps in the entire social support network. Maybe there's other things that could have happened, where I wouldn't need lending for for food and things.

But if we just focus on the lending side, you know, why is that the easier choice? Of course, sometimes it's a human relationship. And that there's, it's very hard to work around that because yeah, it is your mate. What is this person in the community, you've known in some sort of role for 20 years? It's very hard to work around that.

But are the lenders doing enough to create an approachable face for all these customers where we don't have this sort of big intimidating marble fronted bank building that you feel like you need a suit and tie to walk into anymore? Is there a way that people feel comfortable coming to us for for a normal load so that they don't first go to one of these less regulated lenders?

Catherine, you and your team obviously uniquely placed to to fight this and to share knowledge on this with experience as the in police in trading standards in in debt advice services. So if anybody listening, whether they related to that wants to think about their interactions with customers, perhaps customers office at a turning down, or it was somebody interested in the space, where can they go to learn more, and what sort of services can Stop Loan Sharks provide to people working in the UK industry?

Cath Wohlers 12:21

We have a website, which is www.stoploansharks.co.uk

There is also a Scottish team and a Welsh team, and the are links to their websites from our website. So if you're in Scotland or Wales, they work very similarly to us as well.

We offer all sorts of things so we'll offer will offer resources will offer training, one of the things I think lenders can do sometimes is spot loan shark victims, and help actually get them signposted to the correct support at an earlier stage in their journey.

You know, we know that loan sharks last year 60% of the news bank transfer, both to give out the loan, but also to collect repayments. So a loan company looking at open banking or bank statements to assess affordability would be in prime position to spot potentially loan shark activity. And we've developed a free training session around that. So to look at, you know, what, what would that look like? And then what would you say?

How would you actually help that person access the right support, I think this is a perfect time to invest in how we help a customer who is vulnerable, and not just to not become our problem. But actually to help solve the problem. I think in terms of the lending as well, sometimes it's about the loss leader, it's about the smaller amount to start with.

But there are some things like sharks offer that legitimate lenders should not be able to offer and cannot offer. So paperwork, less loans, for instance, you know, the idea of yeah, maybe I'll lend to equip at about 300 with no paperwork, no legitimate lender could ever do that. They go out of business very, very quickly. Whereas that's what loan sharks do no credit checks whatsoever, because they don't care if you can afford to pay them back, they'll just make sure that they're your priority above rent, mortgage council tax or anything else.

So there's, there's areas where I think regulated lenders can never fill the gaps that loan sharks offer, but I do think they could help maybe spot loan shark victims and help us with that kind of prevent message. The idea that, you know, don't borrow from a friend buyer beware, be a bit careful, you know, obviously friends do then friends money.

And if you went to school with someone 20 years ago, and you were their bridesmaid, and they will godmother to your children. But if it's someone at the school gates whose surname you're not quite sure of, and you don't know what the husband does for a living, you know, or anything else? And why are they taking a risk lending you money, what's in it for them? So I think you know, there's messages that we have, that we could be helped to get those out to market.

The other thing we do is we run social media campaigns at least three times a year. We've got to start learning sharps week in May this year, and then we'll have a BAP school campaign because school uniform can be a big trigger for loan sharks, and then a Christmas one as well. And again, there'll be information on the website free resources and if people want to download and share them via their social media for legitimate lenders, that will be amazing. It's a great way of reaching people.

So there's lots of help I think the industry can give us and we're here to help as well because fundamentally, if one of your customers is paying the loan shark they won't pay your loan back because the loan shall be the priority. So at

Brendan Le Grange 15:00

Think we can have like a mutually beneficial relationship? Yeah. And I'll put those links and contact details in the show notes, I think. Yeah, I've spoken to several people in the open banking credit scoring space. I know some of them quite well, actually. So maybe I'll have a little word with him and see about building scores that pick up these sorts of behaviours in an automatic way.

We often forget about that side of things. Once we screen a customer, we see, are they qualifying for my loan, and yes or no and move on. But maybe there's other things we can be doing for customers, since we have the data. And since we have these tools, that's one thing I'll pick up.

I think the other thing just worth reiterating here is is the complex nature of this friends and lenders within the community space, because when I was still at the credit bureau, looking over the industry numbers, during COVID, we ran became a weekly pulse survey of people's attitudes to the finances during the early days, the heat of those locked down months, the most sort of intense period of time there. And we ask them like, yeah, how are you going to make ends meet if you're working in one of these industries that are shut down, and I forget exactly where it fit it in. But in the top three consistently across demographics was friends and family. It is naturally where you want to turn to and probably would expect family first, but the next level is friends.

Catherine, I want to see if we could maybe end on a bit of a happy ending, though, as you said, a friend you've been very successful in prosecuting these cases in bringing some of the perpetrators to justice. I'm sure it's incredibly difficult to hear on a daily basis, these sort of human stories from the victims, but have there been situations that you can talk to where you've been able to bring resolution and sort of some positive cases from the work you've done?

Cath Wohlers 16:51

Yeah, definitely. And from the outside looking in, for people who don't work in the sector, it's just money. But actually, we know working in the sector down where that money's the root of lots of things. Money can underpin good or bad relationships. Money can underpin good or bad self esteem, it can underpin so many things in people's lives.

The gentleman I mentioned, he borrowed £500 and paid back 90 grand over 17 years - the loan shark was arrested, loan shark was sent to prison. And we met up with him and six months later, and he honestly looked 10 years younger. And he was talking about us taking his kids on holiday for the first time, he had stopped taking a calculator to the supermarket because he was on such a limited budget while he was paying the loan shark and he just looks lighter, physically lighter.

And we see that so many times.

You know, I sit with witnesses sometimes when we're waiting in court, and they're terrified to go and give evidence and they come out. And they're so relieved. It gives people such a sense of closure that they've actually stood up to someone. And they've actually been able to put their story across, they've been believed, and there has been an outcome, we get people who are willing to do press and go and do warnings for other people, which always astonishes me.

But they get a real sense of I want to give back. Now I want other people to be helped by my story. It doesn't make it all worthwhile.

And it's not just about money. It's about so much more than that.

Brendan Le Grange 18:03

Even more incentive for lenders to think about how they can make that right. It's not just the stress of financial situations, but it's act that stress has come almost by definition, when the person was already right near rock bottom.

Cath Wohlers 18:18

Yeah, of course, there are some people who accidentally turned to a loan shark, as you say, when there were other options available. But a lot of people were really in a difficult place. And this has made it even more difficult. So you know, being able to resolve that is kind of one of the best things we could do as lenders.

Brendan Le Grange 18:32

So yeah, stop loan sharks. As I said, we'll put the links to that. But I encourage everybody in the lending space to head on over to you know, is there like a global organisation or other ones that you know of in the US and Canada, too?

Cath Wohlers 18:48

Credit is regulated at a state level in America. So there's probably lots of different ones. They're looking at it in Canada, we had some conversations with Canadian law enforcement about six months ago. So I think it might be kind of emerging in Canada as a as a priority.

One of the things we found in England is if you don't go looking for the intelligence, it doesn't flow in. So you need to be actively looking for that intelligence people don't walk into a police station and say help them the victim of a loan shark. So I think it is definitely emerging in Canada as a as a law enforcement priority.

We get contacted all the time by people from across the world saying, you know, can we come and talk to you about how you do it in the UK. But there isn't the kind of overarching body as far as I'm aware.

Brendan Le Grange 19:24

Perfect, well, Cath Wohler, from Stop Loan Sharks, thank you so much for your time today. Yeah, incredibly important work as something that we should all be thinking about within the industry. So thank you for your time today.

Cath Wohlers 19:35

Thanks for having me.

Brendan Le Grange 19:36

And thank you all for listening.

Please do look for and follow the show on your favourite podcast platform and share the updates widely on LinkedIn where lending nerds are found in our largest concentration. Plus, send me a connection request while you're there.

This show is written and recorded by myself Brendan le Grange in Brighton, England and edited by Fina Charleson of FC Productions.

Show music is by Iam_wake, and you can find show notes and written transcripts at www.HowtoLendMoneytoStrangers.show and I'll see you again next Thursday.