Dealing with loan sharks

The best advice for dealing with loan sharks is 'don't'. They're unlicensed moneylenders who charge very high interest rates and sometimes use threats and violence to frighten people who can't pay back their loan.

What is a loan shark?

A loan shark is an unlicensed moneylender who often targets families on low incomes or those who find themselves in difficult times.  

Licensed moneylenders are regulated by the Financial Conduct Authority (FCA) and must follow the FCA's codes of practice. 

Loan sharks are not licensed and operate outside the law. If you borrow from them it's likely you'll:

  • get a loan on very bad terms
  • pay a huge rate of interest
  • be harassed if you get behind with your repayments
  • be pressured into borrowing more from them to repay one debt with another

What to do if you borrowed from a loan shark

If you have borrowed money from a loan shark you are under no legal obligation to repay the debt.

You should contact your local Trading Standards office immediately . They will help you deal with your situation and the loan shark.

Is it a crime not to repay a loan shark?

If a lender isn't licensed by the FCA then they have no legal right to recover the debt.

Loan sharks sometimes frighten people by saying they'll be prosecuted and even sent to prison if they don't pay up. This can't happen - not repaying a loan from an unlicensed lender isn't a criminal offence.

What to do if you're being harassed

Any lender - licensed or unlicensed - who harasses you is breaking the law.

You should report any loan shark to your local your local Trading Standards office and to the police if the loan shark threatens you or uses violence.

Other ways of borrowing money

If you need a loan, always go to a licensed lender. There are reputable lenders who'll consider lending to you even if your income's low, your credit rating's poor or you only need a small amount for a short while.

You may still have to pay a high rate of interest but the Consumer Credit Act will cover your loan agreement. Always shop around for credit though - just because a lender is licensed it doesn't necessarily mean you are getting a good deal.

If you're on a low income and you need to borrow a small amount for a short time, look into borrowing from a credit union. Credit unions encourage you to save what you can and only borrow what you can afford to pay back.

The most you'll pay in interest is one per cent a month, so interest on a £100 loan won't be more than £1 a month.

Where to get help and advice

Many organisations offer free help and guidance on money matters. Always get free, independent help before you pay a commercial service. Agencies that offer free help and advice include:

More useful links

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