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Money, tax and benefits
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. Licensed moneylenders are regulated by the Office of Fair Trading (OFT) and must follow the OFT's codes of practice.
Because they're not licensed, loan sharks operate outside the law. If you borrow from them it's likely you'll:
- get a loan on very bad terms
- pay an extortionate 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
How to find out if a lender is licensed
The Consumer Credit Public Register lists everyone with an OFT licence as well as everyone who has applied for one or has had one taken away or suspended. It's free to get basic information from the register, including trading names and the activities for which a business is licensed.
To search the public register, telephone 020 7211 8608 between 9.30am and 4pm Monday to Friday.
If a lender isn't listed as having a current licence, don't borrow money from them.
What to do if you have 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.
To find your nearest Trading Standards office enter your postcode in the box located on the right-hand side of the Trading Standards website homepage.
Is it a crime not to repay a loan from a loan shark?
If a lender isn't licensed by the OFT 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 Trading Standards office, and to the police if the loan shark threatens you or uses violence.
To find your nearest Trading Standards office enter your postcode in the box located on the right-hand side of the Trading Standards website homepage.
You can also report harassment to Trading Standards online.
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.
Citizens Advice Bureau (CAB)
Your local CAB is a good starting point for free advice. They provide free information and advice on legal, financial and other problems. You can find your local CAB in the phone book or on the CAB website.
National Debtline
National Debtline offers free, confidential and independent help over the phone for people in England, Scotland and Wales. You can call their helpline on 0808 8084 000 between 9.00 am and 9.00 pm from Monday to Friday and from 9.30 am to 1.00 pm on Saturdays (24 hour voicemail). You can also write to them.
The National Debtline website has some useful publications that you can download too.
Consumer Credit Counselling Service (CCCS)
The CCCS has a helpline providing free and impartial advice to people with debt problems. You can call their helpline on 0800 1381 111 between 8.00 am and 8.00 pm from Monday to Friday. You can also write to them.
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