Illegal Money Lending

The following information is primarily drawn from the resources on the Scottish Illegal Money Lending Unit's website.

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What you should know 

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Life after prison or with a criminal record can be challenging. Finding stable housing, employment and access to financial services can feel like navigating a minefield. 

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This vulnerability can, unfortunately, attract predatory lenders, specifically illegal money lenders, often referred to as ‘loan sharks’.

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It is important to be aware that becoming involved with illegal money lending can create further difficulties for you and that there is help available if you feel you have no other option. If you are in financial crisis, there are many charities and organisations who can help you. 

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If you or your family member have fallen victim to a loan shark, or you think you might have, there is also help available.

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What is illegal money lending?

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Illegal money lending is lending of money by people who do not have any valid credit authorisation. The money is often lent at impossibly high rates of interest. 

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What is a loan shark?

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Illegal money lenders, often known as loan sharks, are those who lend money to people without the valid credit authorisation from the Financial Conduct Authority (FCA). Loan sharks usually advertise by word of mouth and appear friendly and accommodating at the start. However, they prey on the most vulnerable people in society and cause immense misery.

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They can start off being friendly and making it look like they are concerned for you but that will change if payments are missed, late or agreements are changed at short notice.

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How can I find out whether someone is a legal money lender?

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Legal money lenders will have valid credit authorisation from the Financial Conduct Authority (FCA). The Financial Services Register is a public record of firms, individuals and other bodies that are, or have been, authorised by the Financial Conduct Authority (FCA).  

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Why are you more at risk of falling victim to loan sharks?

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• Limited access to traditional credit: Banks may be hesitant to offer loans to individuals with a criminal record.  You might have a low credit rating. This lack of options can leave you desperate and susceptible to the idea of quick cash from loan sharks.

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• Financial instability: The transition back into society often involves financial struggles. Unexpected expenses, job search gaps and limited income can create a desperate need for immediate cash, making loan sharks seem like a temporary solution.

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• Lack of awareness: Many people are unaware of the dangers of illegal money lending and the predatory tactics used by loan sharks. This lack of knowledge can make you more vulnerable to their manipulation.

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What you need to know about illegal money lending:

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• Exorbitant interest rates: Loan sharks charge interest rates that are far beyond legal limits, often reaching into the hundreds of percent. This can quickly trap you in a cycle of debt that's impossible to escape.

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• Threats and intimidation: Loan sharks use fear and intimidation tactics to collect debts. This can include threats of violence, harassment and even damage to your property or reputation.

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• Hidden fees: Watch out for hidden fees and charges that can significantly increase your debt. Loan sharks are notorious for employing deceptive tactics to squeeze as much money out of you as possible.

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Ask The Question

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Before borrowing money from anyone, you should ask the following questions:

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• “Has the lender been authorised by the FCA?”

• “Will you tell me exactly how much I’ve borrowed and how much I need to pay back?”

• “Will you give me paperwork and a clear repayment plan?”

• “Can I trust that you won’t add interest or extra charges without warning me?”

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If the answer is to any of these questions is no, they may be a loan shark.

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If you’re concerned that a friend/family member may have borrowed money from an illegal lender, you should ask the following questions:

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• “Are you worried about a loan shark?”

• “Is someone you have borrowed money from threatening you?”

• “Are you worried about the amount you’ll have to repay for a loan you applied for via social media?”

• “Are you struggling to find a way to repay money you have borrowed?” “Can I help you find someone who can support you and help you avoid loan sharks?”

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If you are concerned that a friend, family member or colleague has borrowed from a loan shark, you can contact the Scottish Illegal Money Lending Unit for help and support.

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Remember:

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• Never borrow money from someone you don't know and trust.

• Always get everything in writing, including the loan amount, interest rate, and repayment terms.

• If you feel pressured or threatened, don't be afraid to report the loan shark to the authorities.

• There are legal and safe alternatives to illegal money lending.

• Getting back on your feet after facing challenges can be tough, but there are resources available to help you. Don't let desperation push you into the clutches of loan sharks. Explore your legal options and build a brighter financial future for yourself.

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Where can I get help?

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• The Scottish Illegal Money Lending Unit helpline is free to call and is available 24 hours a day for advice and support: 0800 074 0878. Their website is also full of helpful information and signposting to other support organisations.
• The Scottish Welfare Fund helps families and people in Scotland who are on low incomes by making Crisis Grants and Community Care Grants available to those in immediate need.
• The Money Helper has a series of online guides to help in different circumstances, for example, dealing with court fines, difficulty paying child maintenance and coping with job loss.
• Citizens Advice Scotland have information about accessing food banks and other emergency help in your local area.
• The Financial Conduct Authority (FCA) have a register of authorised lenders. Making use of this list can help you to avoid turning to illegal money lenders (often known as loan sharks).‍
• StepChange, National Debtline, Debt Advice Foundation and Don't Fret About Debt all provide free, confidential and independent advice on how to deal with debt problems.

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Legal alternatives to illegal money lending

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If you are in a financial crisis, there are other options available. Our Poor Credit Rating page has more information on the support and options available to you.

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