Loan shark

From Wikipedia, the free encyclopedia

A loan shark is a person or body that offers illegal unsecured loans at high interest rates to individuals, often backed by blackmail or threats of violence. They provide credit to those who are not willing or are unable to obtain it from more respectable sources, usually because interest rates commensurate with the perceived risk are illegal.

In much of history, usury laws made loan sharks commonplace. Many moneylenders skirted between legal and extra-legal activity. In the western world in recent years, loan sharks have been a feature of the criminal underworld, but otherwise rare. Loan sharks are common in Triads in Hong Kong.

Payday loans and other aspects of consumer finance have made true loan sharks rarer, though some legitimate lenders have been accused of behaving in an exploitative manner. There are many registered and legal lenders that lend to people who cannot get loans from the most mainstream lenders, such as large banks. Terms such as sub-prime lending and "non-standard consumer credit" are used for this type of lender. They often operate in cash, whereas mainstream lenders increasingly operate only electronically, which means that they will not deal with people who do not have a bank account.

Payday loan operations have also come under fire for charging inflated "service charges" for the service of cashing a "payday advance" — effectively a short-term (no more than one or two weeks) loan for which charges may run 3-5% of the principal amount. By claiming to be charging for the 'service' of cashing a paycheck, instead of merely charging interest for a short-term loan, laws which strictly regulate moneylending costs can be effectively bypassed.

[edit] Yamikinyu (loan shark)

The regulation of moneylenders is typically much looser than that of banks. In Japan, Moneylending Control Law requires only registration in each prefecture.

In Japan, as the decade-long depression lingers, banks are reluctant to spare money and regulation becomes tighter, illegal moneylending has become a social issue. Illegal moneylenders typically charge an interest of 30 percent in 10 days or 50 percent in 10 days, which is well over 1,000,000 percent per annum. This is against the law that sets the maximum interest rate at 29.2 percent. They usually do business with those who cannot get more money from banks, legitimate consumer loans or credit cards.

[edit] See also

• Ah Longello

[edit] External links

• The money hole — an article about the loan shark problem in Japan.
• Interview about loan sharking with the FBI — In-depth audio interview about U.S. loan sharking conducted by PLIWatch with the FBI.