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Loan shark debt. What to do if you owe money to an illegal lender.

It's a criminal offence to lend money for profit without a consumer credit licence, although it's not illegal to borrow from such a company or person. Someone who engages in unlicensed lending is typically known as a loan shark.

Loan sharks often lend money alongside another legal or illegal business. The methods they use to lend and collect money vary a lot. These are some of the warning signs to watch out for that a lender is acting illegally:

  • Giving you no paperwork or agreement on a loan 
  • Refusing to give you information about the loan 
  • Keeping items until the debt is paid, such as your mobile phone or cash card 
  • Taking things from you if you don't pay on time 
  • Adding more interest or charges so the debt never goes down 
  • Using intimidation or violence if you don't pay

Not all loan sharks act like this. There are legitimate doorstep lenders such as Provident, and loan sharks sometimes try to imitate doorstep lenders in order to win your trust. You may even be given a payment book or an agreement to sign. However, they have no right to lend you money without authorisation from the Financial Conduct Authority (FCA).

Is it a bad idea to borrow from a loan shark?

There are many risks with borrowing money from a loan shark. They include:

  • A high and often unmanageable interest rate. Loan sharks charge much higher interest than a high street lender would charge you
  • Being harassed or threatened if you fall behind on payments
  • Coming under pressure to borrow even more money to repay your original loan. Doing this gives the loan shark more ‘power’ over you, and makes you more vulnerable to intimidation and violence

When you first meet them, loan sharks will usually seem friendly and understanding to your problems. They do this to gain your trust and make you more likely to borrow money from them. They may even behave nicely after a period of intimidating behaviour, to keep you off balance and ‘train’ you to stay on top of your repayments.

What can I do about a loan shark debt?

If you've borrowed money from a loan shark, the most important things to remember are:

  • You've not done anything illegal and you won't get in trouble with the police. It's illegal to lend money without a licence, but it's not illegal to borrow money from a loan shark
  • You don't have to pay the money back. If the money was lent illegally, the loan shark has no legal right to collect it and they can't take you to court to get it back
  • Don't stop paying a loan shark if you're worried about your safety. Get advice from a specialist before you make a decision

If you're worried about a loan shark, confidential help is available from specialist illegal money lending teams who investigate and prosecute illegal lenders.

Can a loan shark take you to court?

Loan sharks can’t pursue you through the courts for the money you owe them, because the way they’ve lent you money is illegal.

What happens if you don’t pay back a loan shark?

A loan shark might harass or intimidate you if you don’t pay them back. If you’re worried about being threatened, contact one of these organisations for help.

Getting advice on loan sharks depends on where you live in the UK. You can report a loan shark online or call one of the following teams:

  • England Illegal Money Lending Team – 0300 555 2222
  • Wales Illegal Money Lending Team – 0300 123 3311
  • Scotland Illegal Money Lending Team – 0141 2876 655

There's no dedicated Illegal Money Lending Team in Northern Ireland, so it's best that you get free and confidential debt advice to explore your options.

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Is a short term loan right for you?

Buy now pay later, payday loans and doorstep loans can be convenient, if you need money fast. These types of loan are an expensive way of borrowing and can leave you worse off financially.  You should make sure you can afford to repay the full amount – including the interest. You also need to think about what might happen if you fall behind with payments.

Relying on short term, high interest credit to pay for essentials is a sign that you might need help. If you’re struggling with money, find out how we can help you.

There are cheaper ways of borrowing, including arranged overdrafts and credit unions. If you're on a low income and need emergency help with money, you may be able to get support from a trust fund or your local council.

How can I tell if a company has a licence to lend money?

It's not always obvious if a creditor is lending money illegally, especially if they act like a normal business.

The Financial Conduct Authority (FCA) helpline can tell you if a business has a valid consumer credit licence. You can call them on 0800 111 6768.

If you have a payment book or agreement showing an address or licence number, have this handy when you call.

Sometimes a business may have a valid consumer credit licence which allows them to do other financial activities, but not to issue loans. They're still breaking the law if they lend or collect money.

Report a loan shark

If you're aware of a loan shark or have borrowed money from one you can report them anonymously.

Report a loan shark in England

Find out how to report a loan shark in the rest of the UK

Are there alternatives to borrowing from a loan shark?

Even if you’re on a low income or have a poor credit rating, there are safer ways to access money or cover expenses. They include:

  • Help from the government, such as benefits and money to cover food and emergency costs. The government website has information on how to get an advance on your first benefit payment. You can also get advice on your options from Jobcentre Plus
  • Credit unions, who can help you save money as well as offer manageable credit products. There’s likely to be a credit union in your local area, and they’ll consider credit applications from people with poor credit ratings
  • Lending schemes through your employer. Talk to your HR department and ask if they can offer any short-term assistance, such as an advance on your wages or overtime
  • Assistance with your utilities. Many utility providers have schemes and grants in place for people who are struggling with gas or electric arrears. You may even qualify for the Winter Fuel Payment scheme which can help you manage energy price rises in the colder months

We can help

If you've borrowed from a loan shark, we won't judge you, and everything you tell us is confidential. Use our online debt advice tool or call us (freephone, including all mobiles). We'll help you create a personalised budget and give you a tailored solution to help you deal with your debts.