What this guide covers
This guide explains two distinct types of harm that occur outside the regulated financial system: illegal money lending (loan sharks) and lending scams (fake loan offers designed to take an upfront fee and disappear). Both target people experiencing financial pressure. Both have established routes to free, confidential help.
The other guides in this hub cover the regulated system: the Financial Ombudsman Service, the Financial Services Compensation Scheme and the Consumer Duty. None of those mechanisms apply when the firm involved is unauthorised. The protections that do apply come from criminal law, the bank fraud reimbursement rules and specialist government agencies established for this purpose.
If you are already affected
You are not in trouble. Borrowing from an unauthorised lender is not a criminal offence. Lending without authorisation is. The debt is unenforceable. An illegal loan cannot be pursued through the courts. Free help is available immediately. The phone numbers in this guide connect you with trained advisors whose only purpose is to help.
Identifying a loan shark
The legal definition is straightforward: a loan shark is any person or business lending money for profit without authorisation from the Financial Conduct Authority. Authorisation can be confirmed in two minutes using the FCA Register, as covered in our guide on verifying FCA authorisation.
In most cases, however, you will not need to consult the Register to recognise illegal lending. Loan sharks share a consistent set of behavioural patterns identified by the Stop Loan Sharks team and replicated across decades of enforcement work.
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No paperwork or paperwork without legal terms
Authorised lenders are required by the Consumer Credit Act 1974 to provide a written agreement showing the total cost of credit, the APR, the complaints procedure and Financial Ombudsman details. A loan with no documentation (or documentation missing these terms) is almost certainly illegal.
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Personal items held as security
Loan sharks frequently retain a passport, driving licence, bank card, PIN or other valuable item until the debt is repaid. No authorised UK lender takes personal documents as security. Where someone is holding documents you require for daily life, this is a clear warning sign.
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The debt does not reduce
"Double bubble" arrangements (where a £100 loan requires £200 in repayment) and rapidly escalating interest are common loan shark mechanisms. If consistent payments are not reducing the outstanding balance, the arrangement is not a loan in any legitimate sense. It is a recurring extraction.
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Threats, intimidation or unwanted home visits
Authorised lenders are bound by strict FCA conduct rules that prohibit harassment and require fair treatment of customers in financial difficulty. Threatening behaviour, repeated home visits, abusive messages or intimidation in any form are not features of regulated lending. They are criminal offences in their own right.
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Additional credit offered to cover existing payments
A pattern in which the lender offers further credit to help with existing repayments is a recurring loan shark technique that deepens dependence over time. Authorised lenders are subject to creditworthiness rules at CONC 5.2A and cannot continue to lend to a customer who is in difficulty with existing credit.
A loan shark cannot take you to court. The lending itself was illegal, so the debt has no legal force.
The single legal point that matters most
The legal position is the most important single fact to understand. Many people continue making payments for years because they fear court action or believe they have done something wrong by borrowing. Neither concern is grounded in law. The criminal offence is committed by the lender at the point of lending; the borrower is the victim of that offence. The Stop Loan Sharks team confirms this position publicly and consistently.
You are not in trouble if you have borrowed cash or have been paying back a loan from an illegal money lender. The loan shark is. They are the people committing a crime, not you.
Stop Loan Sharks · England Illegal Money Lending Team
Common myths about loan shark debts
Loan sharks rely on misinformation as much as on intimidation. The four misconceptions below are the most common reasons people continue to make payments they have no legal obligation to make.
"I will be in trouble with the police if I tell anyone about this."
False. The borrower is the victim of a criminal offence. The Stop Loan Sharks team works with borrowers, not against them. The helpline is confidential.
"They will take me to court and I will lose my home."
False. An illegal loan is unenforceable as a matter of law. The lender has no civil court route to recover the debt or take any of your possessions.
"Reporting them will damage my credit score."
False. Loan sharks do not report to credit reference agencies. Their lending does not appear on your credit file. Reporting one has no impact on your credit score whatsoever.
"My family will find out if I contact a helpline."
False. Calls to Stop Loan Sharks are confidential. Reports can be made anonymously, with no obligation to provide your name or to make a witness statement at any stage.
Lending scams and advance-fee fraud
Lending scams operate on a different model from loan sharks. The fraudster never lends any money. Instead, the scam takes an upfront "fee" from someone who needs a loan, then disappears.
The pattern is consistent. The applicant responds to a loan offer found through a search engine, social media advertisement, messaging service or unsolicited contact. The applicant is informed of approval. Before the funds can be released, the applicant is asked to pay a small fee under one of several common headings: administration, processing, insurance, deposit or broker fee. The fee is usually demanded by bank transfer to a personal account. Once paid, additional fees are requested under further pretexts. The loan never arrives.
Authorised UK lenders do not require payment before they lend to you. Any request to pay a fee in advance is the clearest possible warning sign.
The single rule that defeats almost every lending scam
Authorised credit brokers may charge fees in some circumstances, but those fees are subject to specific FCA rules including upfront written disclosure, a clear refund procedure and a formal agreement. A request for payment to a personal account (or a vague upfront fee with no documented basis) is a near-certain indicator of fraud. A side-by-side comparison of legitimate and fraudulent lending behaviour makes the differences obvious.
Genuine behaviour
- Listed on the FCA Register at register.fca.org.uk
- Provides a written credit agreement before any commitment
- Discloses APR, total cost of credit and FOS contact details
- Takes no payment from the borrower before lending
- Pays loan funds into a UK bank account in the borrower's name
- Communicates from a corporate email domain
- Provides a statutory cooling-off period
Fraudulent behaviour
- Not on the FCA Register or claims to be an "agent" of a firm that is
- No written agreement or an agreement signed but undated
- Demands a fee before any lending decision
- Repeated requests for further fees after each payment
- Payment requested to a personal name rather than a company
- Communicates from Gmail, Outlook or similar free providers
- Applies pressure to act quickly or risk losing the offer
The website looked completely legitimate. How can it still be a scam?
A professionally presented website can be created in a few hours for minimal cost. Logos, fake FCA references, fabricated reviews and stock photography are all readily available. The only verification that cannot be falsified is a check on the FCA Register itself. If a firm does not appear on the Register, it is not authorised to lend in the UK regardless of how its website presents.
If you have already paid
If you have already transferred money to a scammer or a loan shark, the most important factor is speed. The faster the situation is reported, the higher the likelihood of recovery. The following sequence of steps is the standard approach recommended by Action Fraud, Stop Loan Sharks and the major UK debt advice charities.
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Cease all contact with the lender or scammer
Once a fraud is suspected, no further communication should take place. Requests for "release fees" or "tax payments" to recover what has been paid are themselves part of the scam. Block the contact details and preserve all messages, transfer records and emails for the investigation. Continued engagement increases losses.
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Contact your bank immediately
Use the contact number on the back of your bank card or from your bank's official website. If reported quickly, the bank may be able to attempt a payment recall. Even where recall is unsuccessful, the bank's records of the receiving account contribute to wider fraud prevention efforts and may support your reimbursement claim.
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Identify which consumer protection applies
The applicable protection depends on the payment method. Bank transfers may be covered by the APP fraud reimbursement rules introduced in October 2024. Credit card payments may be covered by Section 75 of the Consumer Credit Act 1974 (see our Consumer Credit Act guide). Debit card payments may be recoverable through the bank's chargeback scheme. The bank will confirm which routes are available.
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Report the offence to the appropriate authority
For a loan shark, contact the Stop Loan Sharks helpline on 0300 555 2222 (or the Welsh, Scottish or Northern Ireland equivalent). For an online lending scam or other fraud, contact Action Fraud on 0300 123 2040. Where there is any threat to physical safety, call 999. Reporting protects others and contributes to enforcement action.
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Speak to a free debt advice service
Citizens Advice, StepChange, National Debtline and MoneyHelper provide free, confidential and independent debt advice. They can help review what has happened, identify recoverable losses and provide ongoing support with any debts that remain. Contact details for each are in the dedicated section below.
The bank refund rules introduced in October 2024
On 7 October 2024, the Payment Systems Regulator introduced mandatory refunds for victims of authorised push payment (APP) fraud. APP fraud is the technical term for being deceived into authorising a payment to a fraudster. The new rules represent a substantial increase in consumer protection compared with the previous voluntary code, which produced inconsistent outcomes.
Banks are required to refund APP fraud victims within 5 working days, up to a maximum of £85,000 per claim.
Mandatory rules in force since 7 October 2024
The rules apply to UK Faster Payments and CHAPS transfers made on or after 7 October 2024. They do not cover card payments, which are protected separately through Section 75 (credit cards) and chargeback schemes (debit cards). Under the regime, around 88 per cent of in-scope APP fraud losses have been reimbursed since the rules came into force, returning approximately £112 million to victims in the first year.
| Element | Provision | Practical effect |
|---|---|---|
| Maximum reimbursement | £85,000 per claim | Covers 99.8% of APP fraud cases by volume |
| Time limit for refund | 5 working days | Bank may pause for further investigation up to 35 working days |
| Optional excess | Up to £100 per claim | Banks may apply, but not to vulnerable customers |
| Cost split | 50/50 sending and receiving banks | Both institutions have a stake in fraud prevention |
| Coverage | UK Faster Payments and CHAPS | Card payments have separate chargeback rules |
| Exclusions | Gross negligence or complicity | High legal threshold, does not apply to vulnerable customers |
| Above £85,000 | FOS escalation route | FOS can award up to £455,000 from 1 April 2026 |
Are there exceptions that could prevent a refund?
Two exceptions apply. The first is an optional excess of up to £100 per claim, which some banks impose. The excess cannot be applied to vulnerable customers and many banks waive it as a matter of policy. The second is the gross negligence exception, which is a high legal threshold. PSR data indicates that approximately 3 per cent of claims are rejected on this ground. The exception does not apply to vulnerable customers in any circumstances.
The APP rules do not cover loan shark repayments
The APP fraud reimbursement rules apply to payments where the consumer was deceived into authorising a transfer to a fraudster believed to be someone else. Repayments to a loan shark are not the same situation: the borrower knew the recipient. A different set of remedies applies to loan shark debts, including the legal unenforceability of the debt itself and the support of the Illegal Money Lending Team. The bank may still be able to assist with practical matters such as cancelling automated payments.
Recovery routes by payment method
The protection that applies depends on how the payment was made. The summary below sets out the standard recovery route for each common payment method.
How was the payment made?
APP fraud reimbursement may apply
Up to £85,000, refunded within 5 working days. Contact the bank without delay.
Section 75 of the Consumer Credit Act 1974
For purchases of £100 to £30,000, the card issuer is jointly liable. See our CCA guide.
Bank chargeback scheme
Not statutory like Section 75, but well-established. The bank will explain how to apply.
Most difficult to recover
Report to Action Fraud and the police. Civil recovery is possible if the perpetrator is identified.
Difficult, but report immediately
Action Fraud may coordinate with exchanges to freeze funds if reported within hours.
Almost certainly fraudulent
No genuine UK lender requests payment by gift card. Contact the card issuer to attempt to freeze unredeemed balance.
Free help: support services and helplines
The following services are free, confidential and independent. None charges fees. Each has been established specifically to help people in the situations covered by this guide. The phone numbers below are worth saving directly.
Stop Loan Sharks
0300 555 2222Free, confidential, available 24 hours a day. The only government agency in the UK with the power to investigate and prosecute illegal lenders. WhatsApp service: 07700 102773.
Wales Illegal Money Lending Unit
0300 123 3311Welsh equivalent of Stop Loan Sharks, providing the same investigative and support functions. Free and confidential.
Scotland Illegal Money Lending Team
0141 287 6655Scottish equivalent, providing investigation and support across Scotland. Free and confidential.
Action Fraud
0300 123 2040The UK's national fraud reporting centre, used for online lending scams, advance-fee fraud and any fraud that does not involve illegal money lending.
Citizens Advice
0800 144 8848Free advice on debt, benefits and consumer rights. Local offices throughout the UK. Wales freephone number: 0800 702 2020.
StepChange
0800 138 1111Free debt charity specialising in practical debt management plans and ongoing budgeting support. Confidential and independent.
National Debtline
0808 808 4000Free debt advice operated by the Money Advice Trust. Combines telephone advice with extensive online tools and resources.
MoneyHelper
0800 138 7777Free guidance on money, pensions and debt, backed by HM Treasury. A useful first contact when the appropriate route is unclear.
Police emergency
999If anyone is making threats of violence, contact the police on 999 immediately. Loan sharks have received custodial sentences for threats made against borrowers.
A note on contacting these services
Reluctance to contact a helpline is the most common reason people delay getting help. It is also precisely what loan sharks and scammers rely on. The longer the situation continues without intervention, the longer the harm continues.
Three points are worth bearing in mind. First, the advisors who answer these phones have heard every variation of these situations many times. They are not friends, family or anyone in your social or professional circle. They are trained advisors whose role is to listen and to help. Second, calls do not appear on credit files or any other public record. Talking to a debt charity has no effect on a credit score. Third, no call commits you to any further action. The decision about what happens next remains entirely with the caller.
The first call does not commit to anything. It simply opens the door.
If you take one thing from this guide, take this
If the situation is unclear, any of the services listed above will help to identify what has happened and what the appropriate next step is. There is no wrong number to call. Citizens Advice will refer to Stop Loan Sharks where illegal lending is identified. Stop Loan Sharks will refer to a debt charity for ongoing financial support. Action Fraud will direct callers to the appropriate authority for the specific type of fraud.
For the wider regulatory framework that protects consumers when dealing with authorised firms, see our guide on how the FCA protects consumers. For the specific routes available where an authorised firm has lent unfairly, see our guide on claiming compensation for unfair lending. For the modern rulebook applying to every authorised firm, see our guide on the Consumer Duty.