Borrowed from a loan shark? What to do

Borrowing from a loan shark is not a crime. Lending money without authorisation from the Financial Conduct Authority (FCA) is. The Police Service of Northern Ireland puts it plainly: you have not committed a crime, you are the victim of one. The teams that deal with illegal lending across the UK exist to keep people safe and to stop the lender, and you can talk to them in confidence, day or night.

How do you know if it is a loan shark?

A loan shark is anyone who lends money as a business without being authorised by the FCA. Stop Loan Sharks, the England Illegal Money Lending Team, lists common signs:

• you were offered a loan quickly, with no paperwork
• the lender seemed friendly at first
• extra charges or huge amounts of interest keep being added
• you have been threatened, or pressured to keep the loan secret
• the lender has taken your bank card, passport or other valuables

A loan shark is not always a stranger. It may be someone on your street, at work or online. You can check whether a lender is authorised on the FCA register. If they are not on it and they lend for profit, they are lending illegally.

Will you get into trouble?

No. Stop Loan Sharks says you are not in trouble if you have borrowed from a loan shark, because it is the lender who is committing a criminal offence.

• You can stay anonymous. GOV.UK confirms you can report a loan shark anonymously, whether you have borrowed from one or just know about one.
• You do not have to make a statement. Stop Loan Sharks says a statement helps, but you are not legally required to give one, and investigators support you before any statement is taken.
• You stay in control. The PSNI says you are under no pressure to make an official statement and it will support you in whatever way suits your circumstances.

People often feel ashamed about borrowing from a loan shark. Lenders rely on that shame to keep people paying. You have not done anything wrong.

Do you have to pay the loan back?

Generally, no. The law says a loan made by someone carrying on a regulated activity without authorisation “is unenforceable against the other party”, and the borrower can in principle recover money they have paid. A court has a narrow power to allow enforcement where it considers that just and equitable, which is why the loan is described as generally, rather than always, unenforceable.

In practice, the PSNI tells victims they are not under a legal obligation to pay any money back, and StepChange says a loan shark has no legal right to collect money that was lent illegally.

Stop Loan Sharks also warns that the person you owe may try to take you to the county court. If you receive court papers about the loan, do not ignore them. Tell the illegal money lending team and get free debt advice straight away.

How do you report a loan shark?

Each part of the UK has its own team. All of them take reports in confidence.

If you would rather not speak to the police or a lending team at all, you can give information anonymously to Crimestoppers on 0800 555 111.

What happens after you report?

• Support is tailored to you. Stop Loan Sharks offers emotional and practical support, including one-to-one help from its liaison officers.
• You are kept informed. If you give contact details, Stop Loan Sharks says it will contact you at the end of the investigation, and support continues through sentencing and beyond.
• Your safety comes first. Stop Loan Sharks Wales says the safety of victims is its priority.

If it is safe to do so, keep a note of what you borrowed, what you have paid and when, and any messages you have received. Do not put yourself at risk to collect it.

What about your other debts?

Many people turn to a loan shark because other bills, rent or debts have become too much. Once you are safe, dealing with those is the next step, and there is free help.

• For help with essentials this week, see emergency money for council crisis payments and other support that does not need to be paid back.
• For safer borrowing, StepChange points to credit unions, which consider applications from people with poor credit, and to schemes some employers run.
• For your wider debts, free, impartial debt advice is available from MoneyHelper, StepChange, Citizens Advice and National Debtline. See where to get free debt advice. An adviser can help you sort out which debts to deal with first; our guide to priority debts explains how that works.
• If this is affecting your health, read debt and your mental health. You can talk to Samaritans free, any time, on 116 123.

Can a loan shark debt go into an IVA, DRO or bankruptcy?

This is a short note, because the usual rules do not fit well. The lender has no legal right to enforce the loan through the courts, so it is not a priority debt in the way rent or council tax is, and it is not something a formal debt solution is designed to pay. Do tell your debt adviser or insolvency practitioner about it, so they can advise on how it should be treated in your case, and tell the illegal money lending team too. Your other debts may well be suitable for a formal solution: our overview of debt solutions and the types of debt hub explain the options.

What to do next

1. If you are in danger, call 999.
2. Contact the illegal money lending team for where you live, using the numbers above. You can stay anonymous.
3. Do not stop paying if you are worried about your safety until you have spoken to a specialist.
4. When you feel ready, speak to a free debt adviser about your other debts.