Struggling households are being preyed on by loan sharks, new research has found.

One in 14 people (7%) said they – or someone else in their household – has borrowed from an unlicensed or unauthorised informal money lender who charges interest in the past three years, according to a survey for non-profit organisation Fair4All Finance.

Illegal money lenders often present themselves as “friends” to their customers, or operate out of businesses which appear legitimate – including cafes and pubs.

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A Sky News investigation last year found more than a million people are in debt to these lenders – a figure that has trebled in the past decade.

Loan sharks can charge people double the amount they originally borrowed and, in some cases, people are unaware how much they are being charged.

Some borrowers had been used as “money mules” in money laundering operations, Fair4All Finance warned – with some then losing their bank accounts as a result. Money muling is an illegal activity.

The organisation – which commissioned the research to shine a light on illegal lending – said borrowers using these methods can end up being harassed with repeated phone calls or visits at home or work, and some may be threatened with violence.

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Sacha Romanovitch, chief executive of Fair4All Finance, said: “There is a growing consensus that structural change is needed to create a credit market that serves everyone.

“Fair4All Finance is convening support from across the financial services sector, regulators and cross-party policymakers to ensure that mainstream banks and lenders better serve millions of creditworthy, lower-income individuals alongside accelerating the scale up of community finance provision.”

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Last week, a report from the Joseph Rowntree Foundation (JRF) said almost a third (31%) of households have less than £200 in savings, which means more people are forced to turn to illegal forms of money lending when emergencies crop up.

The JRF also found that while applications for loans are higher amid the cost of living crisis, approvals are expected to be lower.

Some 24% of low-income households have been declined a loan, and of these, 56% have taken out some form of high-cost credit – including from payday lenders, loan sharks, doorstep lenders or pawn shops.

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The Ipsos UK survey for Fair4All Finance was conducted on more than 1,800 people – aged between 18 and 75 – across Britain.

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