Loan shark or loan smart – you choose

24 May 2019

Loan Smart is a new charity set up to help consumers avoid borrowing money from loan sharks.

A loan shark is a common way to describe an illegal lender who is charging interest on money loaned without the proper authorisation from the Financial Conduct Authority (FCA).

Statistics estimate that there are as many as 310,000 consumers in the UK borrowing from illegal lenders*. People often turn to loan sharks because they are unable to access credit through a regulated lender, normally due to a poor credit history.

Another reason people give for using illegal lenders is that they did not know that the person or firm they were borrowing from was unauthorised. To help with this, Loan Smart aims to:

  • raise awareness of the issue of loans sharks in communities
  • provide practical help for borrowers
  • help shine a light on illegal lending for legislators.

Its website allows would be borrowers to check the FCA’s database to understand if their potential lender is an FCA registered firm. If a tick appears next to the name you enter of the lender into the search facility, then they are fully authorised to provide consumer credit.

If you cannot find the provider, the advice is to contact the FCA customer helpline on 0800 111 6768 to double check. If you suspect someone may be a loan shark or they are acting inappropriately, you can report them anonymously to or by calling the Stop Loan Sharks hotline on 0300 555 2222.

The Loan Smart site also signposts to other useful websites, including free debt advice provider PayPlan, Citizen’s Advice and Money Advice Service. Visitors can find help and advice about alternative forms of credit, such as credit unions or encouragement to seek free debt help if they have multiple debts and are struggling to pay bills.

To raise awareness, Loan Smart is also delivering a series of volunteer-run grassroots initiatives across the UK. Each one aims to engage people in local communities to help spread the message about the dangers of illegal lenders.


Here are clues to help you spot a potential loan shark:

  • No documentation: Illegal lenders tend not to bother with paperwork or formal agreements – if a lender has not provided any documentation, they may be acting illegally.
  • No checks on ability to repay: An authorised lender should usually make a reasonable assessment of creditworthiness to make sure repayments are affordable. If no checks are made, they could be a shark.
  • They don’t say how much is owed: Loan sharks want to keep people in the dark about how much they owe. Be clear about how much is left to repay.
  • They have taken personal documents: Have they taken bank cards, benefits card, passport, watch or other valuables as security? If yes, then they are likely to be a loan shark.


 Not everyone understands the dangers of borrowing from illegal money lenders. Illegal money lenders are often a friend of a friend, or someone down the road. But more often than not people will:

  • Pay far more in interest than you would through any legal lending service and end up owing more than you borrowed.
  • Receive harassing or threatening behaviour if you get behind with your repayments – there have been reports of people being intimidated, blackmailed or attacked.
  • Be pressured into borrowing more money to repay one loan with another, and end up in a spiral of debt that you can never repay.

Loan sharks often start out friendly but resort to intimidation and even violence putting pressure on to pay. They may threaten an individual with prosecution or even say they will go to prison if they don’t pay up.

Any lender – authorised or not – who harasses someone is breaking the law. An unauthorised lender such as a loan shark has no legal right to recover the debt. In truth, they have no legal right to make a person pay the loan back at all – because the loan is illegal.


Even if income is low, there is a history of poor credit rating, or only need a small amount of money is needed for a short while, there are reputable lenders instead of loan sharks.

Credit Unions for example can provide loans at low rates to members and they also encourage members to save regularly, and offer financial advice and assistance.

If someone needs to borrow money urgently, they may be able to apply for an interest-free budgeting loan from the Social Fund, which can help pay for essential or unexpected expenses, including furniture, footwear, travelling, funeral expenses, for people on a low income.

Alternatively, if a client is thinking about borrowing from a loan shark, it might be useful to contact a free debt advice provider who can go through what money you have coming in and going out and recommend debt solutions to help become debt-free.

To find out more about Loan Smart visit


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