Indeed the stereotypical view may exaggerate even the prevalence of threats, explicit or implicit
In terms of the two salient characteristics of loan-sharking, the first being extremely high rates in relation to market norms is certainly true although whether the rates are really so high in relation to risk, no one can say a priori.
It operates in violation of regulations, using underground networks, with payments in cash, and on the basis largely of free-market exchange
As to the second, the use of violence or its threat to ensure repayment, it makes the trade approximate a predatory practice like extortion. In reality actual violence seems rare even criminals who borrow generally repay, for they never know when they might need the services of the loan shark again. Most anecdotal evidence seems to suggest that underground pledges of property are often the collateral, and where none exists, fears of a bad credit rating in the underground economy, or the reputation for having breached a trust, can be sufficient to guarantee payment. To the very limited extent violence or the threat thereof is used, it rarely reaches extreme forms, unless someone clearly had the means to pay and deliberately flaunts their “dead-beat” status. However, there do seem to be more examples of incidents where the violence is against property arson might be used to assure, through the resulting insurance money, that a borrower can repay.
On balance, loan-sharking seems more likely to fit the market-based than the predatory or commercial categories. Yet it is a curious kind of offence in which the borders between sharp business practice and actual crime are hazy, where there are constantly changing norms and institutions, where concern over the phenomenon flourishes and fades for reasons that are unclear, and where the matter might best be treated strictly as a regulatory (and fiscal) rather than criminal code concern. (more…)
