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Millions turning to unauthorised lenders


New research conducted by IPSOS for Fair4All Finance suggests than more than three million people in the UK may have borrowed from an illegal moneylender in the past three years.

In an online survey among adults in the UK aged 18-75, 7% of respondents said that they or someone in their household had borrowed from an unlicensed or unauthorised informal money lender charging interest (sometimes known as a loan shark) in the past three years.

While users of illegal money lenders generally borrowed hundreds rather than thousands of pounds at a time, the total average amount of debt per borrower was significant, at around £3,000. Repayment rates differed, but invariably involved paying back double the amount borrowed. A lack of transparency around the total cost of credit was commonly reported.

With increasing numbers of people struggling through the cost-of-living crisis, illegal moneylenders appear to have moved upmarket, targeting lower-income workers with a median customer income of between £20,000 and £25,000. This group is better off than the poorest fifth of the population and may not previously have considered borrowing from unauthorised lenders.

Although actual violence was rare, the threat of it was pervasive, along with coercive control tactics. There was also evidence of former collectors for now-defunct home credit businesses continuing their operations without regulatory oversight, in a practice known as parallel lending.

The Joseph Rowntree Foundation recently reported that 2.8 million low-income households were refused lending between May 2021 and May 2023, which appears to highlight a growing credit vacuum for lower-income households.

Sacha Romanovitch OBE, CEO of Fair4All Finance, said Our research suggests illegal lenders are flourishing in the credit vacuum left by the departure of high-cost but regulated lenders. The unintended consequence is that millions of people who can well afford to repay a fair loan are left with fewer safe options. There is a growing consensus that structural change is needed to create a credit market that serves everyone.’