In April, the government announced a major £5.5m crackdown on unlawful lending by so-called “loan sharks”. Speaking to the press, Tony Quigley, head of the England Illegal Money Lending team, said that “(l)oan sharks are a blight on society and prey on vulnerable people who struggle to make ends meet…We will not tolerate this sort of criminal activity in our country and loan sharks who are caught flouting the law will be pursued and prosecuted.”
In this article, LoanBroker examines:
- what a loan shark is,
- their unfair lending terms,
- how they use intimidation and fear to make borrowers pay more than they originally agreed,
- what you can do if you’ve already borrowed money from a loan shark, and
- why it’s important to only ever borrow money from an approved and licensed lender.
What is a loan shark?
A loan shark is someone who lends money to people without having the required licence they need to lend money from the Financial Conduct Authority.
If someone offers to lend you money and you can’t find their details anywhere on the Financial Services Register, then, under no circumstances should you accept their offer.
What should you look out for?
Loan sharks deliberately target low-income families and people who, at a particular stage in their lives, feel helpless and vulnerable.
They start off by appearing caring and concerned about your situation. When they ask how much you need to borrow, they often encourage you to take out more because you deserve some breathing space and you deserve not to worry about money because you’ve got so many other things on your plate right now.
Some of the other signs you should look out for are…
Loan sharks never have paperwork
All licenced Financial Conduct Authority lenders are required by law to show you
- the cost of borrowing,
- information showing you what happens if you can’t make a repayment on your loan, and
- the terms and conditions that the loan is made under.
You have to sign an agreement (either with a pen or online) and when you sign that agreement, that commits you to meeting certain responsibilities and it commits your lender to meeting certain responsibilities too.
The problem with having no agreement to go back on is that you can’t rely on the protections an agreement offers if things go wrong.As soon as you take money from a loan shark, they can make the rules up as the go along as nothing’s written down.
Loan sharks aren’t upfront about their interest rates
Loan sharks never provide information on the interest rate they’re charging you or what the penalties are for missing any payments. The loan shark is free at any time to raise the interest rate you pay (often without any warning whatsoever) and there’s no paperwork or agreement you can use to protest against any unfavourable or expensive changes to your loan with them.
Loans sharks are likely to be people you vaguely know of
You never see a loan shark advertise their services anywhere – not online, not by text message, not in a newspaper, not even in a telephone box. Loan sharks are operating illegally and they definitely don’t want anyone in authority to know just what they’re up to.
Instead, they find new victims through word-of-mouth, normally on the same estate where they or their henchmen live. It could be a guy down the pub or it could be the person running one of the local shops.
Loan sharks often take security
There are two types of loan – unsecured and secured. A secured loan is something where a lender can take something of value from you if you don’t keep up the repayments on your loan like your home or your car.
Most loan sharks only lend you money if they have a form of security. The difference is that they take the security away from you at the start of the loan and they don’t give it back to you until you have paid the loan and all the interest off in full. Loan sharks have been known to take cars, treasured personal possessions, TVs, and even passports as security.
Loan sharks make even more money from punitive hidden fees
It may sound strange but loan sharks don’t want you ever pay the loan off in full. Why’s that? If you pay the loan off in full, there’s no further opportunity to hike up the interest rate you’re paying or impose a fine or a penalty on you for whatever reason they choose.
That two-month loan of £200 is a loan you could still be paying back two years later. Even if, by this point, you have paid the loan shark over £2,000 back, they will still say that you owe them money.
sharks intimidLoan ate people into repaying them
When you borrow money from a licenced lender, there are strict rules governing what happens if you fall behind on your repayments. The loans cover the number of times they can text or email you, the number of times they call you, and even the number of times they can visit your home.
Loan sharks have no such rules they operate by. They can harass you, threaten you with violence, damage your property, or even assault you or your family members at will.
Real life experiences of dealing with loan sharks
When you hear about and read people’s experience about dealing with loan sharks, it’s easy to wonder how these people can live with themselves given how much they ruin people’s lives.
If you take anyway anything from this article, LoanBroker just wants you never to fall victim to loan sharks like these people did:
- “If he runs, I will find him” – the fear behind loan sharks (BBC News Online)
- Loan sharks are circling (Guardian UK)
- Illegal loan shark drove me to brink of suicide after £20 loan becomes £7,000 (Daily Mirror)
- Terror at the school gates: loan sharks intimidate parents with dangerous dogs as they pick up kids (Daily Mirror)
- Loan shark’s ‘intimidation built business’ (Manchester Evening News)
- Loan shark made thousands of pounds praying on the vulnerable (Newcastle Evening Chronicle) – he only got an 18-month suspended prison sentence in court (Daily Express)
Where to get help if you’ve borrowed from a loan shark
There are various organisations and people who can help you if you’ve borrowed money from a loan shark and things seems to be spiralling out of control.
If you live in England, call 0300 555 222 to speak with the Illegal Money Lending Hotline. You can text “LOAN SHARK” to 60003 or email them. The team have worked with over 26,000 victims of loan sharks since they were founded in 2004.
For residents of Scotland, you should approach Trading Standards on 0800 074 0878. You can use their website to tell them about your situation too – just visit this website.
Welsh citizens can contact 0300 123 33 11 24 hours a day to speak with the Wales Illegal Money Lending Unit.
Northern Irish citizens should call the Trading Standards Consumerline – they’re available on 0300 123 6262.
How do you know who is a legitimate lender?
All people and companies legally allowed to lend money in the UK have licenses from a government regulator and watchdog called the Financial Conduct Authority.
What firms have to do to get a licence is extensive – click here to see the requirements. These licenses are not easy to get and sometimes an application may have to go through up to a year’s worth of due diligence before a licence is even offered.
In addition, companies in the payday loan and short-term loan sector must comply with additional regulations to give a borrower the peace of mind they need when they’re trying to figure their way out of a position of potential financial distress.
If you take out a payday loan or a short-term loan from a licensed payday lender or short-term credit lender, you benefit from the following protections:
- The interest rate you pay must be no higher than 0.8% a day (equivalent to £24 for every £100 borrowed over 30 days)
- If you fall behind on your repayments, the lender must listen to alternative repayment options you give them and, if they charge a default fee, it can be no higher than £15
- when all your interest and other fees are added together, they can never come to more than the amount of money you originally borrowed. What that means is that, if you borrowed £250, you will never have to pay more than £250 in interest and fees back on top of the original loan amount.
LoanBroker is a licensed credit broker – you can see our FCA licence here. What we do is connect borrowers up to FCA licensed lenders. We and all the lenders on our panel are committed to responsible lending and to ethical and borrower-friendly customer service.
What this means for you is that anyone who uses our service and who borrows money from any of our panel of lenders benefits from the highest levels of protection and safeguarding available.
How does LoanBroker work?
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Here at LoanBroker, we help people find the cheapest possible loan for their personal loans.
We have a panel of leading FCA-licenced loan providers in the UK that we work very closely with. This means that we know exactly what particular lenders look for in an application and we’re able to match you up with the most suitable lender that we know is most likely to accept you for a loan.
Fill up a quick form and we will get back to you with the FCA authorised lender who will be the happiest to have you as a borrower. Our service is completely free of charge for you.
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