For John Plume, the moment he could bear it no more came not when he was told he would have his windows broken, or was threatened with a beating, but when his wife and daughter were forced into prostitution to repay a loan shark from his housing estate.

He had originally borrowed £1,000. Unable to pay the agreed monthly sum, his debt was sold on to another loan shark who demanded immediate repayment of the whole amount, plus extortionate penalties. So intense were the threats of violence to Mr Plume and his family, his wife and daughter took the terrible decision to sell sex.

Unable to live with himself and the thought of what his loved ones were being subjected to, he risked his life by contacting the authorities.

His case is shocking, but not rare in the illegal world of predatory lending where intimidation, brutal assault and even murder are par for the course. As one expert put it: “All cases we come across are extreme.”

Caseloads are on the increase, as are the amounts being borrowed as more and more vulnerable people find themselves in debt, according to Peter Richardson, head of the London Illegal Money Lending Team, set up last year. He says that the main debt advice agencies such as Citizens Advice are experiencing huge increases in demand: “One debt advice centre in London has seen its waiting list increase from one week to six weeks.”

Those who cannot wait that long turn to loan sharks and join the 165,000 people that the Government estimates are using illegal lenders. Other research from the New Local Government Network puts the figure at 200,000. Invariably families with children, those driven to predatory lenders are usually unemployed or in and out of work, many have mental health problems and an increasing number are addicts.

The Plume case also highlights the sophisticated nature of loan sharks. Mr Richardson, who also runs Operation Shark Bait — a multi-agency programme that includes the police, financial investigators and members of his team — said it was typical of the cases he and his colleagues investigate.

Loan sharks often work in teams, ordering borrowers to take out another loan from “a friend” who charges even more extortionate rates of interest and levies huge penalties for missed payments. The loan sharks often have small armies of enforcers who collect their debts and issue the threats.

However, successful prosecutions of several loan sharks has helped the investigators to do their job. “The amount of education and awareness has made people more confident to come forward,” Mr Richardson said.

This year his London team was involved in the prosecution of Majid Tubassum, a violent loan shark who was imprisoned for ten years. He and his henchman kidnapped and beat up a borrower who had ended up owing £250,000 in interest alone.

In one case a victim borrowed £5,000 but ended up owing £375,000. If a borrower makes late payments, the monthly payments go up. In this instance, the person was trying to meet mortgage payments and avoid their home being repossessed.

The team has identified a common pattern among the loan sharks — to charge 10 per cent interest each month on the amount borrowed. If a payment is late, there is a penalty — usually a doubling of the monthly interest. This goes on until the amount borrowed and interest owed is repaid in full. The team came across one case where the victim was being charged 500 per cent interest each month.

Loan sharking used to be seen as a low-key civil matter but with its connection to organised crime, kidnapping, grievous bodily harm and blackmail, it is now being treated as a high-level crime. Mr Richardson’s team is educating the different law enforcement agencies as to the seriousness of these offences: “All our prosecutions go to Crown Court. Since 2008, we’ve had around 15 cases that are through or going through the courts.”

The Illegal Money Lending Team has also changed the way it works, from evidence-gathering inquiries over many months to rapid reaction. “We can now be somewhere within an hour of getting a call,” Mr Richardson said. “We’ve had a couple of cases where loan sharks have breached bail conditions and intimidated witnesses. We’ve responded immediately and charged people with perverting the course of justice and intimidation,” He hopes that the publicity this week over the successful prosecution of John Kiely will encourage even more victims to come forward. Kiely was sentenced to five years in prison for blackmail and a host of other crimes. At the time of his arrest last October he had £800,000 in outstanding debts from 900 clients across several Manchester housing estates.

Experts know that the illegal trade of the loan sharks has flourished since the credit crunch bit. The Social Fund, a source of emergency loans provided by the Government through the Jobcentre network, has seen applications soar from 1.4 million in 2007 to 2.1 million last year. It was forced to turn down 596,000 applications last year, up from 316,000 in 2007.

National Debtline, the government and industry-funded debt advice service, is having to turn away more than 25,000 calls a month because of staff shortages and a lack of funding.

Legal doorstep lenders, such as Provident Financial, have moved upmarket, picking up the new sub-prime borrowers who have fallen out of mainstream lending. That has left thousands to the mercy of the criminals.

There have been numerous calls for the Government to ensure that there are proper alternatives for some of society’s most vulnerable people. One powerful voice was the New Local Government Network think-tank, whose chief executive, Chris Leslie, is a former Labour minister. “The pernicious trend of illegal unsecured lending at extremely high rates of interest, or ‘loan sharking’, is making a comeback,” he said. “A sizeable number of people have little option but to borrow from illegal sources.”

Names have been changed to protect the identity of victims and investigators

Money for nothing? Unlikely, unless you ask your family

Family and friends For many in financial difficulty, those close to them will be their first point of call. Family and friends concerned with your welfare are unlikely to charge extortionate interest, if they do charge at all. But money often complicates personal relationships and can lead to family tension.

Social Fund A government programme administered by Jobcentre Plus. Provides interest-free loans, grants and lump sums depending on circumstances. Crisis loans can be made to those in immediate difficulty. The Social Fund can be applied for over the telephone or at Jobcentre Plus offices.

Credit unions Financial co-operatives owned and controlled by members who share a “common bond”, usually a postcode or a profession. Some credit unions require applicants to have deposited some money before they are eligible for a loan but others, backed by the Department for Work and Pensions, can give loans immediately.

Pawnbrokers Individuals bring in personal items that are handed over, or pawned, in return for a loan of the same value. Interest rates tend to be higher than at high street banks. If customers repay the loan with interest, then they will receive their property back. If not, the broker will sell it on.

Weekly payment stores Shops selling higher-value items, including electronics, home goods and furniture, on credit. Customers usually pay back their purchases in weekly or monthly instalments. While they can be useful for meeting immediate needs, interest rates tend to be high.

Source: Times database

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