Loan sharks

Loan sharks are money lenders who operate outside the law. Their victims usually:

• Have not been able to raise money in any other way.
• A family member or friend has recommended a loan shark.
• The first loan is for a small amount.
• Interest and charges make it hard to repay, so further loans are taken out.
• Items such as benefit books are taken by the loan shark.
• The debt increases continually.
• Threats, including threats of violence are made when payments cannot be made.
• These threats are carried out.
• Victims can see no way out of their situation and can resort to desperate and severe actions.

Typically a loan shark:

• Won't have a consumer credit licence. These are required by law - Check if a lender has a licence
• Won't give you a written credit agreement. Written agreements are also required by law. They must be signed by borrower and the lender and must contain certain important information such as the rate of interest, the amount of each repayment and how many repayments must be made.
• Will charge you a very high rate of interest.
• Will be involved in other criminal behaviour.

Examples of loan sharks:

• Local money lenders who prey on low income families and individuals who often take out small loans frequently, but end up being charged very high rates of interest.
• Car dealers who sell loans as part of their business but don't have a licence.
• Employers who provide their employees with loans and/or advances on salaries or wages and require the employee to pay back the money with interest and/or in more than four payments.

In the past the Illegal Money Lending Team has secured convictions for drugs offences, blackmail, violence, rape and other offences linked to the illegal lending.

Across the Stop Loan Sharks Project more than 200 prosecutions leading to 130 years worth of prison sentences have been secured for illegal money lending and related offences, almost £40million worth of illegal debt has been written off and over 18,000 victims have been helped.

Loan sharking is an illegal activity; it makes victims lives a misery.

Victims are trapped into spiraling debt and the loan sharks often resort to the most extreme methods such as violence, threats or intimidation to pressure victims into paying loans back.

Nationally there are an estimated 310,000 households borrowing from illegal money lenders.

With a lack of paperwork, victims are kept in the dark about how much is owed and will charge exorbitant interest rates - in some cases in excess of 130,000% APR.

If you know the identity of an illegal money lender you can contact the Illegal Money Lending Team in confidence at the stop loan sharks website or call 0300 555 2222.

You can report loan sharks or unlicensed money lenders online:

Report a loan shark or unlicensed money lender

If you fall in to debt and your repayments become more than you can afford you should get advice quickly. Sources of advice include:

• National Debtline - 0808 808 4000
• Citizens Advice consumer service telephone helpline on 0808 223 1133
• MoneyAdviceService - information and guidance from the Financial Services Authority

Debt management companies

Many people who fall in to debt find that they are contacted by debt management companies, who offer to wipe out debt or to reduce the payments. Some will also offer advice on bankruptcy or other individual insolvency options.

It is important to remember that these companies are businesses and usually take a fee for negotiating a debt management plan on your behalf with lenders.

Some charities and advice organisations such as your local citizens advice bureau may be able to offer you a similar service free of charge.

Debt management companies and charities must have a consumer credit licence.

For low cost loans, contact First for Money Credit Union