A Typology of Profit-Driven Crimes
Appendix III: The Loan-sharking Scene in Montreal Today
Although there may be big time sharks associated in some way with gangs and groups, it seems that most in Montreal today are strictly neighbourhood operators with never more than $1000 on the street. Most taverns have their sharks, who could be the manager. But the most common place to negotiate a quick loan seems to be a dépanneur – whose owners are rarely particularly scary. Most sell food, cigarettes (sometimes from under the counter, tax-free), beer, and cheap wine on credit, so it is natural extension for them to advance cash to clients they know and trust. Interest rates seem to be much higher than for more orthodox sharks, those detached from any link to retail sales. The money goes mainly to finance drinking, drugs, and gambling – if it went to food, the normal process of retail credit would be used instead. It seems that some small-scale loan sharks will lend to women more easily than men – they have less trouble getting welfare payments to amortize the loan, and, in extremis, they can offer sex in payment, directly or indirectly. Many of these characteristics probably show up in pawn shop-based operations too.
Even when sharks are big time and unaffiliated with any retail institution, there is no need for them to have mob links. Three years ago a student of mine approached a prominent loan shark (who claimed he had so much money on the street, he lost track of it – so the student designed a spread-sheet that would solve the problem, fortunately never offering it to the shark.) The pretext was that the student needed $1000 to pay off an overdue credit card debt. He returned the next week with the $1000 plus $70 for interest (7% per week). He thereby both won the shark’s confidence and aroused his curiosity about what went on in a McGill course called "The Underground Economy." It turned out that "Nick the Shark" had been in business for about 30 years, operating out of a bar he inherited on his father’s early demise. Initially he began lending without interest the money from his father’s life insurance policy to customers, most of them neighbourhood characters with a weakness equally for booze and gambling. But when he heard that some bragged about how they had taken him for a ride, Nick took to charging interest.
Today most of his customers are low-income individuals, perhaps welfare and unemployment insurance recipients, who are also bad credit risks for regular financial institutions. The rule is to lend to them only small sums, the limits set by the size of their payments from the government, which also makes them quite secure. Interest varies from 5-10% per week, depending on the individual and the amount at risk. Interest must be paid weekly though the principal can remain outstanding more or less forever.
However, Nick also services another set of customers, much fewer in number, with considerably bigger loans. These are usually professional black-market dealers who handle wholesale lots of stolen goods, drugs, or smuggled booze and cigarettes. They, unlike the retail customers, normally return part of the principal along with each weekly interest payment. If they get apprehended, they are responsible for paying back only the principal plus 10% as long as they are in prison. But, once they are out, regular interest charges start to apply to both the principal plus the extra 10%. However their rate is lower than the retail clients, falling into the 3-5% per week range. In this respect, Nick operates much like any legitimate financial institution – large business clients can borrow larger sums at lower rates.
In almost all cases of failure to meet scheduled payments, the deal can be renegotiated to fit the client’s financial capacity. However, for long-term receivables from difficult clients, Nick subcontracts to a collector who gets 30% of whatever he can recover. This share is not much different from that charged by legal collection services whose methods can be almost as impolite and threatening.
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