Loan shark
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 cannot 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.
For instance, many banks practice usurious lending by authorizing bank card transactions for amounts greater than the account holder's account balance, and demand a fee for this "service". In the world of paper
checks, the bank was not involved with the transaction until well after the fact. With a Bank Card (
credit card,
debit card check card) and other electronic transfers, the bank has the final say in authorizing or declining the transaction, and many authorize transactions well beyond the account balance for the sole purpose of charging the
overdraft fee, which is generally well in excess of the maximum interest rate permitted by the state in which the bank operates.
Payday loan operations have also come under fire for charging inflated "service charges" for the service of cashing a "payday advance" â€" 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 paycheque, instead of merely charging interest for a short-term loan, laws which strictly regulate moneylending costs can be effectively bypassed.
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.
*
Ah Long*
The money hole â€" an article about the loan shark problem in Japan.
