Loan sharks and sexual exploitation: how are they linked?

At CSE Aware, we have highlighted how vulnerabilities such as substance use, mental and physical health challenges, insecure housing, and no recourse to public funds are among factors that can push women into selling or exchanging sex and prevent them from exiting. This time, we wanted to shed light on how these vulnerabilities can be targeted by illegal money lenders commonly referred to as loan sharks.
 
To better understand what loan sharks are, how they operate, and how financial and sexual exploitation intersect, we sat with John Pollock, the Partnership & Support Officer with the Scottish Illegal Money Lending Unit.
 
What is illegal money lending?
It’s operating without an authorisation from the Financial Conduct Authority. Any legitimate lender, be that a bank, a legitimate payday lending company or a legitimate doorstep lender – they all must be authorised by the Financial Conduct Authority and abide by their set rules.
 
This gives a lot of benefits for a borrower: for example, any action taken against them is taken through courts, there is the date arrangement scheme and other legal interventions that could take place before really bad things happen such as losing a house. An illegal money lender doesn’t have to abide by those rules – they can charge whatever they want, they can tell people how long they're paying back over, and they don’t have to give paperwork and receipts.
 
There can be consequences if repayments are not made, including threats, intimidation and violence. People have been asked to commit criminality, for example, to shoplift or keep drugs. Sexual exploitation also takes place: we’ve had number of cases over the years where people were forced into prostitution or provided sexual gratification to the borrower.
 
Threats and intimidation – realising that somebody can act against you and not knowing when it may happen – can have a massive impact on victims’ mental health. We’ve seen images being taken of victims’ family members and loan sharks threatening to act against them. We’ve seen lenders turn up at victims’ funerals and saying to surviving family members that they now owed money. One thing to remember is that loan sharks are criminals – all they think about is how much money they can get, and they will commit criminal acts to get that money for as long as they possibly can.
 
What are key characteristics of illegal money lenders and people that borrow from them in Scotland?
When I first joined the team, we were dealing with around 90% male lenders. It was the most deprived areas that were affected, for example, the north and East End of Glasgow and parts of Edinburgh like Leith, Pilton, and Muirhouse. However, since around 2010 changes started taking place. Currently, around 50% of lenders are female. It’s similar for victims: when i first started, up to 70% of them were male, whereas now around half of victims are female.
 
We are also seeing an increase in different types of people borrowing money. When I first joined the team, the vast majority of borrowers lived in socially rented accommodation, were low paid or on benefits, were either single or single with kids, or lived in a non-married relationship with children. The pandemic has totally flummoxed that, and many of our preconceived ideas about what illegal money lending is in Scotland – and UK-wide – has changed. Now we’re seeing people that are not necessarily low paid but are medium to low paid; just above what we would describe as low paid workers.
 
The impact of the pandemic had a very significant role. Due to Covid, people were on furlough and were losing 20% of their wages, with the government covering the remaining 80%. There were lots of people who lost their jobs, who were really struggling to get by. Additionally, money lending has become more digital than what it was in the past – we’ve gone from what we would consider a cash first society to now having various means of transfer, be that a bank transfer, using payment companies, as well as elements of cash.
 
What are key reasons for borrowing from loan sharks?
For a lot of people, it’s about needing money, needing credit for an emergency or to make up the shortfall on something. For example, a young lady borrowed from an illegal money lender because her kid was out playing football on the street – he had fallen, skint the knee out his trousers, and she needed £10 to go to Asda to buy a new pair of school trousers. She went to somebody she knew – he gave her a loan and that snowballed into a situation where she owed him thousands of pounds. Yet for other people, it’s about wants – it's a similar model with credit cards that can be used to buy things people don’t necessarily need.
 
However, there have been changes in the dynamics of money borrowing. In the past, the type of money lending that we were seeing was maybe £10 or £20 pounds at a time; now people are borrowing £100 or £1000 and racking up significant amounts of debt. The cost of living is going up and people are no longer borrowing £10 to shop for a week, they’re now borrowing £50-£100 just to do a family shop. That problem rolls on to the next week and they end up continually borrowing. We refer to it as the cycle of lending – we rarely see somebody borrowing only once.
 
How do victims learn about illegal money lenders?
The vast majority is through word of mouth. The other kind of emerging trend since Covid has been online communication, for example, via Reddit or closed Facebook groups. For example, we’ve been given screenshots of a number of closed Eastern European Facebook groups. This poses a challenge as while we do have some cyber capabilities, it’s not easy to access and impact those communities.
 
A 2022 report “Swimming with Sharks: Tackling Illegal Money Lending In England” found evidence of women who were asked for ‘payment’ in the form of sexual favours or turned to selling sex to finance their borrowing. Could you tell us more about cases in Scotland?
We’ve had cases involving sexual exploitation. For example, just before I joined the team there was a case involving a member of a minority community who had come across from an East Asian country and graduated from a Scottish university. She got a job a high street bank in Edinburgh; however, she didn’t have a lot of friends, especially those from her community who attended the same university. She turned to gambling, started going to casinos, and eventually became addicted to it. She began to lose more and more money and eventually she approached someone from her community for money. Unfortunately, he was a member of a local gang. Over time, the repayments were missed, and the gang asked her to commit criminality by stealing information from her work. She was caught and suspended, but that didn’t free her of the debt. At the end, she was forced into prostitution and driven around at weekends around Scotland to work in massage parlours or flats.
 
We’ve had a case with a male who only lent to a certain ethnic type of female because that was his sexual gratification. There were cases where males and females have committed sexual offences as part of repayments. For example, there was a male student in Edinburgh who was forced to conduct sex acts on another male as part of repayments. Unfortunately, in the majority of cases, we couldn’t get a conviction as there’s real fear and embarrassment to talk about these experiences.
 
How do the Illegal Money Lending Team in Scotland learn about victims’ financial and sexual exploitation?
Generally speaking, a lot of our referrals come from either people directly or from a third-party agency, be that Police Scotland or an advice agency. Somebody is coming forward to report on borrowing from an illegal money lender, we’re taking a witness statement, talking through the whole situation, and a disclosure of sexual exploitation can take place as part of that. It is not something that is disclosed at the beginning but after other things are discussed.
 
Partnership work is important in this context. It’s about getting the best people in the room to talk about people’s experiences and be able to support them the best possible way. We need to address the whole picture – for example, sexual exploitation, money lending, and substance use – when the person is ready. If we just deal with one part of it, we are not going to be able to remove a money lender. It’s important to understand why victims borrowed in the first place; otherwise, the problem won’t be resolved in the long-term.
 
How well known is the issue of illegal money lending among services in Scotland?
The knowledge has improved significantly over the last two years. We provide regular training sessions – for example, this year we're well on course to surpass 300 people being trained in Scotland. Yet, it could be better and we’re always looking for ways to improve it. We’ve been looking at what we produce – our materials are free – and what more we could do via webinars and our YouTube channel. We want to make it easier for services to understand the issue. People don’t come across the issue of illegal money lending on a day-to-day basis, but it’s important to keep it in their consciousness. For many people, it happens in front of their eyes, and they just don't see it.
 
What would be your advice for staff supporting (potential) victims of illegal lending?
My advice would be to build confidence with clients. It’s about being person-centered and using language that both the worker and client can understand. It could be as simple as handing a leaflet on illegal money lending or showing a client one of our one-minute animated clips.
 
At the end of the day, workers will know their client better than anybody else so it’s about using that experience to ask about an illegal money lender. There no silver bullet at asking the exact question, but that opens up once we start talking about it with a client. It’s important to be honest and upfront – ask the client if they’ve borrowed from a loan shark. Our English counterparts at the Illegal Money Lending Unit have found that 75% of the people would have disclosed that they had borrowed from an illegal money lender if they had been asked.
 
One of the things that we have built into everything is ensuring that the client is as comfortable as they possibly can be. For example, if there’s a support worker working with the client, we recommend that the worker attends the first meeting with us. That way the client has the support readily available. But it could also be a friend or a family member; someone they trust and who knows their circumstances.
 
It's important to stress that those who have borrowed money from illegal money lender haven’t done anything wrong. They will not be in any bother even if they knew it was a loan shark. We understand that victims might not necessarily want to take it to next stage and formally report a loan shark. It’s a big step forward for victims to speak about having borrowed money or think about going to court, but there are long major steps before that. Our client’s safety is our biggest concern, and we will do our best to make sure that people are safe and secure – we are not in this just to remove a loan shark.
 
The Scottish Illegal Money Lending Unit provides support and guidance. They can help access long- term support to move away from using loan sharks as well as accessing local services, including debt advice services, credit unions, addiction counselling and local support groups. The helpline is available for victims of illegal money lending, family members, support services and members of the public who think that someone in their community is illegally lending money.
 
Contact the Scottish Illegal Money Lending Unit helpline on 0800 074 0878 for advice or to report a potential loan shark.