Compass launches campaign against legal loan sharking

Irresponsible lenders who target desperate people with high interest rates are being targeted in a the End Legal Loan Sharks campaign by the pressure group Compass.

Door to door loan sharks, who lend to 3 million people according to Compass, often charge £83 in interest and collection charges for every £100 borrowed.

A further million and a half more are indebted to payday lenders which have short-term loans with annual percentage rates (APR's) that often begin at 600% and can escalate to 2500% or more.

Borrowing £500 from a lender charging 177% APR would mean you would pay back £825.

Compass is calling for lending rate caps to cover all consumer credit, which are in place in Germany, France, Poland and parts of the US.

A good alternative to a loan shark is a credit union, which usually charge around 26.8% APR. Borrowing £500 from a credit union would mean you would only pay back £567.

The campaign supports credit unions, which they want to see as part of a national network, and also wants to see a People's Bank created using the Post Office.

You can sign the petition and, if you have had problems with a loan shark, you can also share your story anonymously with Compass.

The Leicester Mercury has a story on the behaviour of a pair of loan sharks, showing how dangerous many of these people are.

Loan sharks affect everyone. Research for Leeds City Council conducted in 2004 reported that interest payments to door to door moneylenders alone were costing the local economy up to £9.5 million per year, having particular effect in deprived areas.