Headlines: May 29th, 2009

A local government think tank has warned that 200,000 people are at risk from illegal loan sharks. In a report the New Local Government Network is urging councils to do more to support local credit unions and step up action against illegal lenders.

The report says the reduction in sub-prime or ‘door-step lending’ will mean more people turning to illegal lenders. It predicts that an extra 35,000 people are likely to use loan sharks during the recession but accepts that the number could be even higher. It is calling on local authorities to put additional resources into credit unions and to use new Council Banks to make affordable loans available to those who cannot access high-street credit.

The NLGN is warning that the legal sub-prime market has declined since the recession and suggests that a quarter of a million people will lose access to doorstep credit. This downturn has also seen the number of loan refusals by the emergency Social Fund rise from 316,000 to 596,000. Customers who would have previously used these services, the report says, may now turn to loan sharks.

It argues that councils should to step in to protect vulnerable people through a range of measures, including backing more credit unions, mapping predatory lending and improving their enforcement action against loan sharks. Chris Leslie, the author of the report, said: “Local government has historically been at the forefront of new service provision where community needs exist and have the advantage of proximity to their front line and prime local knowledge. Further intervention from local government is a crucial next step and we look forward to strong leadership from the sector at a time of great urgency.”