Loan shark fear as short-term lender faces scrutiny


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The head of Britain’s biggest pawnbroker has said regulation on cash loans risks pushing some people to loan sharks ahead of Christmas.

Shares in H&T Pawnbrokers dived in early trading after it revealed the City watchdog was reviewing some of its historic lending.

Boss John Nichols said the firm would work with regulators but that its cash-strapped customers would be affected.

It has stopped unsecured lending while the review is carried out.

Mr Nichols said he hoped these cash loans, which are separate to pawnbroking and typically amounted to about £500, would be available again from January.

He admitted that the timing was a concern for the business, with pre-Christmas a busy time for giving short-term loans, and had come “a bit out of the blue” from the regulator – the Financial Conduct Authority (FCA).

“The unintended consequence is that people could go to unregulated lenders,” he said.

Regulation of short-term, high-interest cash loans has had a significant impact on the credit industry in recent years – particularly among big payday lenders, some of which have collapsed.

Regulators have introduced stricter rules on ensuring that loans should only be given to those who can afford to repay.

The company is working with the FCA to review its affordability checks for loans over the last six years, which Mr Nichols suggested had previously been given a clean bill of health.

They relate to cash loans, sold from H&T stores, which typically required repayment within six to 12 months. Such loans would have relatively high interest, as they were available to people who might struggle to be accepted for a loan from the bank.

Over the past six years the company said total customer interest payments were £24m. The review will consider whether any compensation should be paid.

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Many were taken by surprise when A&B abruptly ceased trading in September

It said: “Should any redress be payable, H&T anticipates being able to fund this from its existing financial resources.”

Although the company said this area of its business only accounted for 4% of revenues, its shares fell by 25% in early trading before recovering later in the morning.

Pawnbroking unaffected

The pawnbroking arm of the business, one of the biggest in the UK, is unaffected. This will be a relief to some customers who were shifted over from rival Albemarle & Bond (A&B) when the latter collapsed in early September.

Many were taken by surprise when A&B abruptly ceased trading, blaming “significant” financial losses. Some even feared goods such as jewellery and gold would never be returned.

But H&T agreed to buy £8m worth of loans linked to customers’ belongings – known as “pledge books” – from Speedloan Finance, which had traded under the name Albemarle & Bond.

The deal meant customers of A&B could redeem or extend their existing loans at H&T’s 248 UK pawn shops.

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