Loan sharks are circling west London, offering cash at exorbitant interest rates to victims of the recession warns Westminster Council.
The warning from Westminster Council comes amid reports of people knocking on doors in the north of the borough, attempting to persuade hard-pressed residents to take cash loans - with up to 300 per cent interest rates.
The practice, often done with a verbal agreement, breaks money-lending laws and is frequently accompanied by threats of violence and damage to property, according to Peter Richardson of Trading Standards' Illegal Money Lending Team (IML).
"People who have lost their jobs, have outstanding debts, are owners of small businesses with bills to pay and are unable to raise money through credit or other legal channels, can become desperate and find themselves taking cash from a loan shark," he said.
"The loan shark will put them in a position where they can't possibly pay back the cash - often by charging two or three times the value of the loan.
"Then they will intimidate the borrower, when they realise they can't repay that sum. We have reports of actual violence or loan sharks forcing their victims into crime to pay back the debt."
Last year 235 Londoners came forward as victims of loan sharks to the IML, owing more than £635,000 in total. Some were indebted to several illegal lenders, borrowing from one to repay the next.
And with the recession pushing people from all social backgrounds into desperation, many more are likely to fall into the trap of taking illegal loans as the downturn deepens, Mr Richardson added.
"But there's always a solution outside of turning to a loan shark. People should come forward because they are not committing an offence when they borrow from a loan shark. If they come to us, we can advise them on repaying their debts without resorting to a loan shark."
Councillor Daniel Astaire, Westminster Council cabinet member for community protection, said: "The credit crunch is putting more financial pressure on families, making it harder to make ends meet but loan sharks are not the answer.
"These individuals profit from the desperation of others. At best, they rip people off by charging exorbitant rates of interest and at worst they are criminals who threaten - and sometimes use - violence.
"There are support services available to help people deal with debt in a legal and manageable way so people don't need to resort to these rogue traders."
Licensed money lenders are regulated by the Office of Fair Trading (OFT) and are listed on the Consumer Credit Public Register. Basic information such as trading names and activities the company is licensed for are free from the register. Lenders who are not licensed have no legal right to recover a debt. [25cf] Call 020 7364 6886, text 'Shark Bait' (plus your message) and send to 60003, or email loansharks@towerhamlets.gov.uk
