Loan shark

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A moneylender is a person or body that offers a loan at a very high interest rate usually without having the relevant authorization of the local financial regulator (illegally). This term usually refers to illegal activity, but may also refer to predatory borrowing at very high interest rates such as payday or secured loans.

Unfortunately, the unintended consequence of poverty alleviation initiatives is that loan sharks borrow from formal microfinance lenders and lend to poor borrowers. Moneylenders sometimes enforce payments with extortion or threats of violence. Historically, many loan sharks go around legal and criminal activity. In the western world recently, loan sharks have become the hallmark of the criminal world.

Video Loan shark

United States

19th century payday lenders

In the late 19th century in America, the low interest rate of law makes small loans unprofitable, and small time loans are seen as irresponsible by the public. Banks and other major financial institutions move away from small time loans. However, there are many small lenders who offer loans at favorable rates but illegally have high interest rates. They present themselves as legitimate and openly operated outside the office. They are only looking for customers who have a permanent and honorable job, regular income, and a reputation for protecting. This makes it impossible for them to leave the area before they pay their debts and more likely to have valid reasons to borrow money. Gamblers, criminals, and other types that can not be trusted, unreliable, are avoided. They make borrowers fill out and sign contracts that seem legitimate. Although these contracts are not legally enforceable, they are at least proof of the loan, which can be used by lenders to blackmail a defaulter.

To force defaulters to pay, lenders may threaten legal action. This is a bluff, because the loan is illegal. Lenders prey on legal borrower's ignorance. Alternatively, lenders are forced to embarrass the public, exploiting the social stigma of being owed to moneylenders. They can complain to employers who are absent, because many employers will fire employees who are mired in debt, because of the risk they steal from employers to repay debt. They can send an agent to stand outside the house defaulter, loudly denouncing him, possibly ruining his home with graffiti or notice. Either because it is gullible or embarrassed, borrowers usually give up and get paid.

Many customers are employees of large corporations, such as trains or public works. Larger organizations are more likely to fire employees for debt because their rules are more personal, which makes extortion easier. It is easier for lenders to know which large organizations are doing this as opposed to gathering information about many small companies. Larger companies have more job security and greater promotion possibilities, so employees are sacrificed more to ensure they are not fired. Moneylenders can also bribe large company payers to provide information about many of their employees. Salaries and regular payments make negotiating payment plans easier.

The amount of the loan and the payment plan are often adjusted to the way the borrower. The smaller the loan, the higher the interest rate, because the cost of tracking and pursuing defaulters (surcharge) is as large as the size of the loan. The lenders' attitude towards the delinquents is also diverse: some are soft and reasonable, ready to extend and slow to harass, while others dishonestly try to milk everything they get from the borrower (eg impose late fees).

Since payday loans are a bad trade, the owners of these companies often hide from public view, hiring managers to run their offices indirectly. To avoid further drawing attention, when expanding its trade to other cities, an owner often finds a new company with a different name than expanding its existing company into a very real leviathan.

Penalties for becoming a lightweight illegal lender. Illegal borrowing is a minor crime, and the penalty is forfeiture of interest and possibly also. But this has only been imposed if the borrower sues, which he usually can not do.

Opposition to payday lenders is spearheaded by social elites, such as businessmen and charitable organizations. Entrepreneurs are encouraged not to fire employees who are indebted to loan sharks, because they unwittingly support the industry by providing lenders by extorting their customers ("pay or we will notify your boss and you will be fired"). Charities provide legal support to troubled borrowers. This fight culminated in the drafting of the Uniform Small Loans Act, which brought a new class of licensed lenders. The law was enacted, first in several states in 1917, and was adopted by all but a few countries in the mid-20th century. The model law mandates consumer protection and limits the interest rate on loans of $ 300 or less by 3.5% per month (42% per annum), a favorable rate for small loans. The lender must provide a copy of the customer of all signed documents. Additional charges such as late fees are prohibited. The lender can no longer receive power of attorney or recognition of the customer. This licensing law makes it impossible for lenders to disguise usury as legal. Small loans are also beginning to become more socially acceptable, and banks and other larger institutions are starting to offer them as well.

20th century gangsters

In the 1920s and 1930s, American prosecutors began to notice the emergence of a new generation of illegal lenders who used violence to enforce debt. The new small lender law has made it almost impossible to intimidate customers with a layer of legality, and many customers are less vulnerable to embarrassment because they are self-employed or ill-advised. Thus, violence is an important tool, though not the only one. These moneylenders operate more informally than the payroll, which means more wisdom for the lender and less document and bureaucracy for the customer. They are also willing to serve high-risk borrowers who will not be touched by legal lenders.

However, the threat of violence is rarely acted upon. One possible reason is that injuring a borrower may mean he can not work and thus will never be able to pay off his debt. Many regular borrowers realize that most of the threats are bluff and that they can get away with delinquent payments. A more definitive consequence is that the naughty borrower will be cut off from future loans, which is serious for those who are regularly dependent on moneylenders.

One important market for violent money lenders is the operators of illegal gambling, who can not expose themselves to the law to collect legally debt. They work with moneylenders to provide credit and collect payments from their passengers. Thieves and other criminals, whose fates often change, are also served, and this relationship also allows the loan shark to operate as a fence. Another type of high-risk customers are small entrepreneurs in financial difficulties who can not qualify for an official loan.

Hard loan borrowers are usually run by criminal syndicates, such as the Mafia. Many of them are former liquor makers who need new jobs after the end of the ban. By the 1960s, loan sharks became more coordinated, and could gather information about borrowers to increase risk and ensure borrowers did not try to pay off a loan by borrowing from other moneylenders. A frightening mafia's reputation or a similarly large gang makes the threat of leeches more credible.

Mafia links

Origins_in_.22salary_buying.22.2C_1920-criminalization "> Origins in" payroll purchase ", 1920-criminalization

Although the reform legislation intended to expose loan sharks to extinction, this species of predatory lenders thrives and evolves. After high-level salary lending is prohibited, some pirated vendors resell the product as a "salary purchase". They claim they do not provide loans but buy future wages at a discount. This form of loan sharks proliferated through the 1920s and entered the 1930s until the new draft of the Uniform Small Loan Law closed the gap through which salary buyers had slipped. Shark payday loan purchases continued to operate in several southern states after World War II because the usury rate was set so low that licensed private finance firms could not do business there.

Post-criminalization

Organized crime began to enter the cash withdrawal business in the 1930s, after high-level loans were criminalized by the Uniform Small Loans Act. The first reports of borrowing loans sprang up in New York City in 1935, and for 15 years, the world's money lending appeared to be limited to the city. There is no record of the operation of the "juice" syndicate in Chicago, for example, until the 1950s.

Initially, underground loan loans were a small lending business, serving the same population served by payday lenders and buyers. Those who turn to lenders can not get credit in a licensed company because their income is too low or they are perceived as risky. Companies operating in usury resist about half of all applicants and tend to lend more to married men with decent jobs and decent income.

Those who can not get a legal loan of 36% or 42% a year can earn an advance from a mafia at a rate of 10% or 20% per week for small loans. Because mass loans are usually not secured by legal instruments, debtors promise their bodies as collateral.

In the initial phase, most borrowing loans consist of payday loans. Many customers are office employees and factory hands. Loan funds for these operations come from the number of rackets and are distributed by superiors to low-lying echelons at a rate of 1% or 2% per week. The 1952 B-movie Loan Shark , starring George Raft, offers a glimpse of payday loan. The edge of the beach in Brooklyn is another site of a world wide payroll payroll operation around the middle ages.

<1960s era-now

Over time, shark sharks move away from such workforce rackets. In the 1960s, preferred customers were small and medium-sized businesses. Business customers have the advantage of having assets that can be seized in the event of a failure, or used to engage in fraud or money laundering. Gamblers are another lucrative market, as are other criminals who need financing for their operations. In the 1970s, mass salary lending operations seemed to have withered in the United States.

At its peak in the 1960s, underground lending loans are thought to be the second most profitable organized franchise of organized crime in the United States after illegal gambling. The newspaper in 1960 was filled with sensational stories of debtors who were beaten, abused, and sometimes killed by loan sharks. But a careful study of business has raised doubts about the frequency used in violent practice. The relationship between creditors and debtors can be friendly, even when "vig" or "juice" is too high, because each requires the other. FBI agents in one city interviewed 115 customers from a mass-loan business but only one borrower was threatened. Nothing was beaten.

Non-mafia shark

Organized crime has never had a monopoly on black market lending. Many pocket-lenders operate outside the jurisdiction of organized crime, wearing interest on usury for cash advance. This informal credit network is rarely the concern of the authorities but develops in populations that are not served by licensed lenders. Even today, after the emergence of corporate payroll loans in the United States, unlicensed loan sharks continue to operate in immigrant enclaves and low-income neighborhoods. They lend money to people who work in the informal sector or who are considered too risky even by creditors who cash checks. Some people beat naughty kids while others take assets instead. Their rates range from 10% to 20% a week, just like shark sharks in the past days.

Maps Loan shark

UK loan shark

Research by governments and other agencies estimates that 165,000 to 200,000 people are indebted to loan sharks in the UK. Illegal loan sharks are treated as high-level crimes by law enforcement, due to their association with organized crime and the serious violence involved. High-interest salary loans are legal in most cases, and have been described as "official loan leeches" (in the sense that creditors are legally registered, pay taxes and contributions, and can recover payments if they take the case to adjudication; no threat of harm to the debtor).

Inspired by the Loan Shark Olympics - a Loan Shark Introspective ...

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Moneylenders Loans in Ireland

The Central Bank of Ireland was criticized for not doing anything to protect low-income, vulnerable or low financial literacy rates of moneylenders when it emerged that up to 100,000 of the 360,000 loans provided by moneylenders were illegal.

Loan Sharks in New Zealand | Last option loans | NZ Loans

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Non-standard lenders in the United States

In the United States, there are lenders who are licensed to serve borrowers who can not qualify for standard loans from key sources. These smaller non-standard lenders often operate in cash, while major lenders are increasingly operating only electronically and will not serve borrowers who do not have bank accounts. Conditions such as sub-prime loans, "non-standard consumer loans", and payday loans are often used in connection with this type of consumer financing. The availability of these services has made it illegal, loan shark lenders are scarce, but these law lenders have also been accused of behaving exploitatively. For example, salary loan operations have been criticized for billing "enhanced service charges" for their services monetizing "down payments", effectively short-term loans (no more than a week or two) that may cost 3-5% of the principal amount. Claiming to charge a "service" cash salary instead of just charging interest on short-term loans, laws that strictly regulate borrowing costs can be effectively passed.

payday loans

Licensed payroll businesses, which lend money at high interest rates on outdated check security, are often described as moneylenders by their critics because of high interest rates that trap debtors, stop illegal lending and voting practices. Today's payday loans are a close cousin of early 20th-century payroll loans, a product in which the nickname "shark" was originally applied, but they are now legalized in some states.

The comparison of the 2001 short-term lending rate ratio imposed by Chicago Outfit organizing crime syndicates and payday lenders in California revealed that, depending on when a payday loan is repaid by the borrower (generally 1-14 days), the interest rate charged for the day payday loans can be much higher than similar interest rates made by organized crime syndicates.

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Yamikinyu in Japan

Loan arrangements are usually much lighter than banks. In Japan, the Money Supply Control Law only requires registration in each prefecture. In Japan, along with decades of depression, banks are reluctant to set aside money and regulations to be more stringent, illegal money lending has become a social problem. Illegal lenders usually charge 30 or 50% interest in 10 days (in Japanese, this is called "to-san" ('to' meaning ten and 'san' which means three) or "to-go" ('to' meaning ten and 'gone' meaning five)), which is about 1.442 million% or 267.5 million per year. This is against the law that imposes a maximum interest rate of 20%. They usually do business with people who can not earn more money from banks, legitimate consumer loans, or credit cards.