Loan shark
Because loan sharks operate mostly illegally, they cannot use the legal system to collect such debts, thus they often resort to enforcing repayment by terms of blackmail and threats of violence.
[3][4][5][6][7][page needed][8][page needed] A key difference between "traditional" loan sharking and predatory lending is that lenders alleged to be engaged in the latter practice are expected to stay within the law when making and collecting loans, and thus the debate into such practices often focuses on whether they are ethical as opposed to whether they are legal.
However, laws regulating lending practices vary so widely between jurisdictions (even in the same country, particularly between states in the United States) that particular practices that might be technically legal (if arguably unethical) "predatory lending" in one jurisdiction might be considered illegal "loan sharking" if attempted in an identical manner in a different locale.
In Japan, as the decades-long depression lingers, banks are reluctant to loan money and regulation has become tighter, illegal moneylending has become a social issue.
[13] Ah Long (derived from the Cantonese phrase '大耳窿' ('big ear hole')) is a colloquial term for illegal loan sharks in Malaysia and Singapore.
They lend money to people who are unable to obtain loans from banks or other legal sources, mostly targeting habitual gamblers.
They charge high interest rates (generally about 40% per month/fortnight) according to Anti-Crime, Drug and Social Development Voluntary Organisation[14] and frequently threaten violence (and administer it) towards those who fail to pay on time.
According to local police authorities, there have been cases where borrowers and their family members were beaten or had their property damaged or destroyed, and some victims have committed suicide.
Commerce Minister Kris Faafoi announced that the Credit Contracts Legislation Amendment Act 2020 would come into force on 1 May 2020 rather than 1 June 2020.
[18] By June 2024, figures released by the Ministry of Business, Innovation and Employment showed that no customers had been granted high-cost loans in 2023.
They focus on poor workers and gamblers, advertising their services on walls and electric poles as well as online platforms such as Google and Facebook.
[not specific enough to verify] In recent years, the government has tried to stop these loaners from operating and encouraged people not to borrow money from them.
[citation needed] The research by the government and other agencies estimates that 165,000 to 200,000 people are indebted to loan sharks in the United Kingdom.
[26] In the late 19th-century US, the low legal interest rates made small loans unprofitable, and small-time lending was viewed as irresponsible by society.
The attitudes of lenders to defaulters also varied: some were lenient and reasonable, readily granting extensions and slow to harass, while others unscrupulously tried to milk all they could from the borrower (e.g. imposing late fees).
[27] Because salary lending was a disreputable trade, the owners of these firms often hid from public view, hiring managers to run their offices indirectly.
This fight culminated in the drafting of the Uniform Small Loan Law, which brought into existence a new class of licensed lender.
[30] One important market for violent loan sharks was illegal gambling operators, who could not expose themselves to the law to collect debts legally.
Thieves and other criminals, whose fortunes were frequently in flux, were also served, and these connections also allowed the loan sharks to operate as fences.
Although the reform law was intended to starve the loan sharks into extinction, this species of predatory lender thrived and evolved.
This form of loansharking proliferated through the 1920s and into the 1930s until a new draft of the Uniform Small Loan Law closed the loophole through which the salary buyers had slipped.
[32] Salary-buying loan sharks continued to operate in some southern states after World War II because the usury rate was set so low that licensed personal finance companies could not do business there.
[33] Organized crime began to enter the cash advance business in the 1930s, after high-rate lending was criminalized by the Uniform Small Loan Law.
In the beginning, underworld loansharking was a small loan business, catering to the same populations served by the salary lenders and buyers.
The firms operating within the usury cap turned away roughly half of all applicants and tended to make larger loans to married men with steady jobs and decent incomes.
Business customers had the advantage of possessing assets that could be seized in case of default, or used to engage in fraud or to launder money.
[36] At its height in the 1960s, underworld loansharking was estimated to be the second most lucrative franchise of organized crime in the United States after illegal gambling.
Plenty of vest-pocket lenders operated outside the jurisdiction of organized crime, charging usurious rates of interest for cash advances.
Even today, after the rise of corporate payday lending in the United States, unlicensed loan sharks continue to operate in immigrant enclaves and low-income neighborhoods.
Licensed payday advance businesses, which lend money at high rates of interest on the security of a postdated check, are often described as loan sharks by their critics due to high interest rates that trap debtors, stopping short of illegal lending and violent collection practices.
