Illegal loan or friend loan.

Gus73

Firstly hello and apologies for the long post.

Hoping someone can advise on this recently found out my partner has ran up credit card debt. I have contacted stepchange to try and get a repayment plan organised for her. However she has also borrowed some money from a work "friend" she borrowed 2,000 over a 12 month period but has to pay 2,600 back. She did this in 2020 and paid it all back then she immediately borrowed the same amount again. She made 4 payments totalling 850 but then basically ran out of money. The lender has added 50 a month every time she has missed a payment. And has also loaned to several other people at her works on similar terms.

Step change haven't included this in the plan as they regard it as an unlicensed loan but if we pay the monthly amount the friend is asking we wouldn't have enough money left to do a plan with the other creditors. And their advice is to contact the illegal money lending service which my partner doesn't want to do as they are a colleague and thinks they are a good person for helping people where as i think they are an illegal predatory lender due to the amount of Interest they charging and the fact they lend to quite a few people.
I want to either stop paying until the debt plan is finished or pay them at a lower rate. However if they are adding 50 on every month this would mean paying them back far more than even the 2600 they wanted back originally. And I also don't want to risk my partner getting a ccj against them.

The lender didn't ask her about her financial situation and the only paperwork my partner  has is an email agreeing acknowledging the loan and that they would pay 2600 over 12 months nothing about non payment or additional interest fees.
I have occasionally lent money to people at work but I have never asked for any interest on the original amount I thought you couldn't profit on a loan so you could ask for a reasonable amount of Interest as you would lose that through not having it invested but this person has done it multiple times and gets 300 profit in every 1000 lent plus extra when they inevitably struggle to pay it back.

My partner is sick with worry over the whole debt situation and I want to try and get this debt plan going as soon as I can , but i don't want to cause her further worry and risk her getting taken to court as mentally I don't think she could cope.

DE_612183

 "She did this in 2020 and paid it all back then she immediately borrowed the same amount again. She made 4 payments totalling 850 but then basically ran out of money" - surely 4 x 850 = £3400? - do you mean £85 a month so she has only paid £340?
If I'm right she owes £1660 and if she doesn't pay for 12 months she'll have £600 added which is about 37% APR.

My suggestion would be to go to the colleague and suggest that a payment of say £95 a month is made for the remaining 20 months ( if this is affordable ).

2nd option would be - could she get an "official" loan - I'm guessing not, but if she is working she may be able to get a small loan to pay off the balance in full and then it could be taken into account.

Ultimately, she may have to say to the person she owes money to that she can't afford to reply the loan or the "interest" - as there is nothing official I don't think she could be taken to court, and even if that did happen, she just get a court order to pay what she could afford ( which won't be a lot ).

It's probably in the interest of the lender to come to an agreement - it may be worthwhile you speaking to the lender on your partners behalf - if the agreement is more widely known they may be more amenable and less likely to take advantage. 

marcia_

 Sounds like a loan shark to me 

https://www.gov.uk/report-loan-shark

https://www.citizensadvice.org.uk/debt-and-money/borrowing-money/types-of-borrowing/loans/loan-sharks/

Gus73

She has paid 4 months back and the total she paid so far is around the 850 mark as she had to pay around 216 a month . But now they have added interest onto every month that she has not paid and the new total is 2033 to pay over 8 months. But this isn't mentioned in the initial agreement

Gus73

So if even we did manage to pay them back on the amount they want her to pay the loan amount was 2000 and she will have paid back 2900 over 18 months

SaverRate

Just report the person - that will soon end it! Sounds like this person is taking advantage and is bringing misery to alot of people! 

Brie

The 37% someone has noted as the interest rate isn't unusual for high risk cards but even those should have a sanity check on affordability.

I agree that she needs to tell the friend it's unaffordable.  And whether she tells them directly or via you is up to her.  

Now I'm not suggesting that anyone threatens this person but I think that pointing out that it's actually illegal even if the intention is to be in some way helpful would be a good thing.  Also it's not just the police/fraud squad that might be interested in knowing about this but the employer might as well.  I know that a lot of companies take a very dim view of sharp practices.  And if the employer is in the financial industry it may well be a case of immediate dismissal.  It might be that by pointing out these things the lender may be more willing to accept a fairer pay back.

fyi - I doubt the lender would take this to court as that would be to publicly admit what they are doing.  So if necessary I would consider this the lowest priority of loan to pay back.  

And assuming you can come to some sort of agreement with the lender would you be able to repay on your partner's behalf?  

powerspowers

I’ve dealt with the illegal money lending time through work and they are fab. This type of lender “the helpful work collleague” is really common, I bet they’ve taken advantage of loads of people at work and in the past. They’re trying to make a fortune out of your partner and will be doing it to others. They tend to whack fees on the end as well, getting free can be difficult. 

They have no legal basis to take your partner to court. They are acting criminally, taking advantage of people struggling financially and could be made to pay every penny back and go to prison! Your partner hasn’t done anything wrong but she needs to get free, stop paying and focus on her legal creditors. 

Have a look at 

https://www.stoploansharks.co.uk/ they are really good and can help x

powerspowers

Also- this person isn’t really a friend. If they are signing up one person a week they could easily be making £30,000 tax free a year. They’re a predator! 

Don’t try to come to a deal, they’ll accommodate so far and then the extra charges will be whacked on the end. 

Gus73

If it was just me I'd just report her, but my partner is under severe stress and depression over it all and I know she doesn't want to report her and i dont want to cause her more stress . So I might just say I am willing to let her pay the balance just on the 2000 actually loaned at a monthly amount my partner can afford if they won't accept this then I will just stop paying and report

powerspowers

Thanks for coming back Gus73. It does sound like your partner is having a hard time and you’re doing your best to be supportive. I’m not surprised she is stressed dealing with it, it’s a hard situation to get out of and she probably feels worse for getting into it in the first place. Keep doing what you are doing, helping her with taking each step at a time- and do come back and post if you need to! 

I’d make sure to keep any messages / emails from the lender though- just in case things escalate or she changes her mind about reporting.