Everything you need to know about loan sharks
With price increases on everything from fuel to food making it increasingly tough for households to make ends meet, unlicensed lenders – more commonly known as loan sharks – are stepping in.
A loan shark will make false promises of a quick and easy loan, then demand extortionate levels of repayment.
Lenders who do this are often a last resort for people who have no other option for obtaining credit, including those with poor credit histories who are rejected by mainstream lenders. With just one unexpected bill, people can quickly find themselves trapped in a vicious cycle of debt.
A report published by the Centre for Social Justice estimates that 1.8 million people in the UK could be borrowing from an illegal money lender. This figure has more than trebled since 2010.
But what is a loan shark?
A loan shark is someone who lends money without the correct permissions from the Financial Conduct Authority (FCA).
Lending money without a licence is illegal. However, it’s important to know that if you borrow from an illegal money lender, you have not broken the law, they have.
Illegal money lending is an under-reported crime and causes a great degree of fear in those who encounter it. Borrowers become trapped in a spiral of extortion, and can face intimidation, violence, and financial ruin.
Loan sharking also takes a psychological toll on victims and their families, leaving them feeling trapped and helpless.
How to spot a loan shark
The loan shark might be a friend or acquaintance, or they might simply be someone known in the area for lending money.
Loan sharks can operate anywhere, including the workplace. There have been reported cases of loan sharks lending money to colleagues in financial difficulty.The person may offer you cash. They will rarely provide any paperwork, and will charge exorbitant amounts in repayment. They may be deliberately unclear about what you have to pay back. Sometimes they use threats and violence against those who fall behind with their payments.
Cyber loan sharks are also becoming more prevalent, targeting people through social media and online adverts. These online loan sharks use misleading ads, false promises of easy money, and harassment to trap vulnerable people in debt.
Is your current lender legal?
It isn’t always easy to spot a loan shark from the outset, so it’s good to be suspicious of loan providers – and they'll often be the ones will go out of their way to 'help you out'.
If someone is lending you money, they must be registered with the Financial Conduct Authority (FCA). The Financial Services Register lists firms and individuals that have authorisation to offer loans and credit. Before borrowing money, research the provider carefully. If they are not listed on the FSR, they are not safe to borrow from.
Perhaps you have taken out a loan but aren’t sure of the lender’s status. If you can answer yes to one or more of these questions, you may be borrowing from an illegal money lender:
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Did they offer you a cash loan or bank transfer?
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Did they not give you paperwork?
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Did they add huge amounts of interest or APR to your loan?
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Have they threatened you?
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Are you scared of people finding out?
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Have they taken your bank card, benefit card, passport, watch or other valuables from you?
How to get help
If you are struggling to pay off a debt to a loan shark, or you’re worried about a loved one engaging with a dodgy provider, you can access specialist advice and support from the England Illegal Money Lending Team. The team exists to help victims of illegal lending, and their friends and family.
There is also a Stop Loan Sharks Helpline. It’s available 24 hours a day, seven days a week on 0300 555 2222. You can also use the confidential live chat service on their website to speak to a support worker between 9am and 5pm, Monday to Friday.
If you’re struggling with debt repayments, feeling anxious and want to get on top of your finances, remember you can get in touch with PayPlan for free and confidential advice.