The phrase ‘loan shark’ for many people conjures up images of violence, shadowy characters and underhand dealings. However, for some it may seem that loan sharks are the only realistic way to get hold of the money they need, particularly for those with poor credit histories or those who need cash quickly, and it’s easy to be tempted into borrowing. This can quickly become a vicious cycle as interest rates suddenly rise and you find yourself on the receiving end of threatening and even violent behaviour if you do not pay.
What is a loan shark?
A loan shark is an unlicensed money lender. All money lending organisations are required to register with the Office of Fair Trading (OFT) who can then make sure they are properly run. Loan sharks are unlicensed and therefore illegal. You can find out if a lender is licensed by visiting the Financial Conduct Authority website to search the register or calling 0800 111 6768 or 0300 500 8082 between 8am and 6pm Monday to Friday. You should only borrow money from lenders with a current license.
Unlicensed lenders tend to operate outside the law. This can mean the terms on which they will loan you the money can be extremely unfair. They may:
- Charge very high rates of interest.
- Harass you if you do not keep up payments.
- Use threats or violence to make you pay them the money they say you owe.
- Force you to take out further loans with them to pay off the interest you owe, meaning you sink further into debt.
- Suddenly increase the rate of interest or add extra charges to your debt.
- Take your benefit or bank card as ‘security’ on your loan.
- Not give you any paperwork outlining the costs of your loan or how much you will need to repay and when you will finish paying.
- Not keep any records of how much you have borrowed or any payments you make, so you may find it difficult to keep track of what you actually owe.
What alternatives are there?
Most people who turn to loan sharks feel that they will not be able to get credit elsewhere and the loan shark is their only option.
There are a number of creditors who will loan money to people with a poor credit history, and although most of these will charge higher rates of interest than normal bank loans, they are unlikely to be as high as those charged by loan sharks. See our page on Loans for more information on where you can legally obtain a loan.
Another good option is your credit union. Credit unions are formed by groups of people with a common bond (for instance who all live or work in the same area) who pool their savings and then make loans to members out of this pot of money. The interest rate charged on these loans is usually low and they are available to all members regardless of credit history. Most credit unions insist you pay into a savings account with them for a set amount of time before you become eligible for a loan, so it’s important you consider opening an account before you reach the point where you are in desperate need of the loan.
What should you do if you have taken money from a loan shark?
If you are concerned you’ve borrowed money from an unlicensed lender, don’t worry, you haven’t broken the law – they have. You can report them in confidence, by:
- Calling 0300 555 2222, or
- Texting ‘loan shark’ and the details you want to pass on to 60003, or
- Sending an email to email@example.com
Remember, loans from an unlicensed lender are unenforceable, meaning you cannot be made to repay the money the loan shark says you owe. Loan sharks are also often involved in other sorts of crime, including knife and gun crime and drug dealing so their activities may have a wider impact than you realise. Illegal money lending is NOT a victimless crime.
What will happen when I report a loan shark?
The case will be investigated by the Illegal Money Lending Team. They will provide you with help and support throughout the process, and have produced the following advice for loan shark customers to help them know what to expect:
“They’ve been with me every step of the way. They’ve been brilliant. Looked after me and helped me get my confidence back and get back on track. Kept in touch, sorted everything out. Really good. Really good.”
Client from a previous Loan Shark case
- You do NOT have to pass information to the team yourself. Someone else can do it for you. Your housing provider could be your point of contact with the Illegal Money Lending Team.
- You do not have to provide your name or contact details, although it is helpful in case our investigators need to check something with you.
- You can meet with a LIAISE Officer rather than an Investigator who will guide you through the process of giving information to the team and help you decide whether to pass on information or give a statement.
- We will treat you as an individual, work with you, keep you up to date with each stage of the investigation process and take your views into consideration.
- We will help you access local support that is relevant to your needs such as affordable credit, debt advice, maximising your income etc.
- One-to-one support will be provided for you – you will be given a named contact with their details so you can speak to a member of the team when you require.
- If you choose to give a statement you may be called to be a witness in court. If this happens, you will be treated with sensitivity. As well as one-to-one support from your LIAISE Officer you will be offered the support of the Witness Service who will provide staff and trained volunteers to help you, your family and friends at the court before, during and after the trial. The team will provide transport to and from court, and will offer you the chance to have a look around the court before the trial if you want to.
- We will listen to your concerns; we will support you and we will work with others to keep you safe. We can stop this together. You are not alone.
By reporting information to the illegal money lending team you can help stop yourself and your community being ripped off and living in fear.
You are not in trouble for borrowing from a loan shark – they are!
“To be honest if it wasn’t for the Illegal Money Lending Team, I would still have been scared all the time and hidden and not gone out or anything. They make you feel at ease and everything, telling you that these are bad people, and I had done nothing wrong.”
Client from a previous Loan Shark case