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A moneylender offers small personal loans at high rates of interest, usually higher rates than the market rate charged on credit cards or on bank overdrafts. Moneylenders are an important source of credit to a category of borrowers who would normally be refused credit by most financial institutions because their income may be at or below the poverty threshold or whose credit score indicates that the borrower might be unable to repay the loan. Because personal loans offered are unsecured and the risk of default by the borrower is high, moneylenders charge an effective interest rate that is in the range anywhere between 100% to 400% APR. [1].
[edit] HistoryMain article: Usury Banking during Roman times was not as we understand banking in modern times. During the Principate the majority of banking activities were conducted by private individuals, and not by large banking corporations that exist today. Moneylending not only allowed for those people who needed money to have access to it, but that through direct transference between bankers, the actual usage of currency was not needed because it could be done purely through financial intermediation. Large investments were conducted and financed by the faeneratores (trans. financier), whilst those that worked professionally in the money business and were recognised as such were known by various names, such as argentarii (trans. banker), nummularii (trans. money changer), and coactores (trans. debt collector), but the vast majority of money-lenders in the Empire were private individuals, since anybody that had any additional capital and wished to lend it out, could easily do so.[2] Money-lending during this period was largely a matter of private loans being advanced to people short of cash, whether persistently in debt or temporarily until the next harvest. For the most part it was undertaken by exceedingly rich men who were prepared to take on a high risk if the profit looked good; interest-rates were fixed privately and were almost entirely unrestricted by law. Thus investment was always regarded as a matter of seeking personal profit, often on an exorbitant scale. Banking was of the small back-street variety, run by the urban lower-middle class of petty shop-keepers. By the 3rd century, acute currency problems in the Empire drove them into a state of decline.[3]  Banking was never condemned by the early Christians. The early Christian movement largely spread amongst the urban business-classes in the first few centuries; they were a band of shop-keepers, traders and small businessmen. Callistus, who later became Pope Callixtus I had a career as a slave in charge of a bank which apparently failed. It seems clear that the Roman Catholic Church was not at this stage totally opposed to earning a reasonable living by taking interest; money changing must produce some profit if it is to succeed as a business, and Callistus’ Christian clients undoubtedly expected some return for their deposits. [4] The Church’s attitude hardened by the 3rd century, by which it had ceased to be an illegal sect largely confined to the urban business class; it had become the official religion of the empire embracing in some way all the social classes within it. As for general social conditions, the rich were the moneylenders who were in a position to take advantage of the situation when the ever-increasing tax demands in the last declining days of the Empire crippled and eventually destroyed the peasant class by reducing tenant-farmers to serfdom. It was only too evident that usury meant exploitation of the poor.[5] The Church prohibited usury, as restated by the encyclical Vix Pervenit as late as 1745, which reafirmed the view that it was a sin to charge interest on a money loan. The development of double entry bookkeeping would provide a powerful argument in favor of the legitimacy and integrity of a firm and its profits. As a usury is no longer morally suspect and business is accepted as a right and proper activity.[6] [edit] Moneylending in the UKIn the UK, the moneylending sector is currently referred to as Home Collected Credit (HCC), reflecting the fact that loans and subsequent repayments are made and collected in person by moneylenders or their agents at their customers' doorsteps. The largest lender in this sector is Provident Financial, which has 1.5m customers out of a total of 2.5 million people who borrow from HCC providers, giving the company about 60% market share.[7] In 2005, home credit lenders lent £1.3-2.3bn and collected £1.8bn in repayments.[8] [edit] Competition Commission inquiryIn 2006, the Competition Commission published a report into their public inquiry into the home collected credit market, which accused Provident Financial of making profits in excess of what could be justified by their costs.[8] Provident disputes this allegation. They estimated that in the industry as a whole, profits of £75 million over the cost of capital were made each year from 2000-05. They also stated that home credit lenders were not competitive on price, partly because demand was not sensitive to changes in price. [edit] RegulationMoneylenders in the United Kingdom are regulated by the Office of Fair Trading, and must be licenced to lend money under the Consumer Credit Act 1974. Moneylenders who are unregulated, engage in predatory lending or seek to enforce loan agreements by illegal means such as extortion are commonly referred to as loan sharks. [edit] See also
[edit] References
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