Millions turning to unauthorised lenders as new report shines a light on illegal moneylending in Great Britain

  • New research by IPSOS suggests more than 3 million people have borrowed from an unlicensed or unauthorised money lender in the last three years
  • A further report by Fair4All Finance and We Fight Fraud highlights dangers of a growing credit vacuum for lower income borrowers
  • Fair4All Finance convening cross sector and cross party support for reform to create a credit market that serves everyone

Over 3 million people in Great Britain may have borrowed from an illegal moneylender in the last three years according to new research by IPSOS for Fair4All Finance.

Results from a new online survey amongst a representative quota sample of adults in Great Britain aged 18-75 found 7% said that to the best of their knowledge, they or someone in their household has borrowed from an unlicensed or unauthorised informal money lender who charges interest (sometimes known as a loan shark).*

In a separate lived experience report published today, we highlight the relative ease that people can access £1,000s from illegal moneylenders in towns and cities around Great Britain.

Written in partnership with specialist researchers We Fight Fraud, the report presents a candid new insight into the nature of this symptom of financial exclusion based on rare access to both illegal lenders and nearly 300 people using them in Port Talbot, Preston, Glasgow and South London.

As one door closes – Experiences of illegal moneylending

While users of illegal money lenders generally borrowed hundreds rather than thousands of pounds at a time, the total amount of debt per borrower was significant at around £3,000 on average. Repayment rates were different but invariably involved paying double. However a lack of transparency or awareness of 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 £20,000 – £24,999. This group is better off than the poorest fifth of the population and may not have considered this option until recently.

Researchers found that although actual violence was rare, the pervasive threat of it along with coercive control tactics were common.

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.

Researchers detected a resignation to the idea of resorting to an illegal lender, as reflected by just 1% of customers in the research reporting their situation to illegal moneylending teams around the UK. Indeed, many were phlegmatic about it: ‘He’s just the money man.’

Joseph Rowntree Foundation recently reported 2.8 million low income households having been declined lending between May 2021 and May 2023 which appears to highlight a growing credit vacuum for lower income households.

‘Our research suggests illegal lenders are flourishing in the credit vacuum left by the departure of high cost yet 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. Fair4All Finance is convening support from across the financial services sector, regulators and cross-party policy makers to ensure that mainstream banks and lenders better serve millions of creditworthy, lower income individuals alongside accelerating the scale up of community finance provision.’

Sacha Romanovitch OBE, CEO of Fair4All Finance

We’re concerned that illegal moneylending could be a growing problem as more households struggle to access credit to help them manage life events and meet unexpected costs.

The report presents seven recommendations for policy reform to accelerate people’s access to fair credit from both commercial and community finance providers, to introduce a credit broking exemption to third sector organisations and to further resource the Illegal Money Lending Teams.

IPSOS technical note

Ipsos UK conducted an online survey amongst a quota sample of 1,859 adults aged 18-75 in Great Britain. All provided explicit consent for data to be collected regarding their household and personal finances. Fieldwork was conducted online between 16th – 19th June 2023. Data have been weighted to the known representative proportions for age and working status within gender, and for social grade, Government Office Region and education (graduate/non-graduate), to reflect the offline population of GB adults aged 18-75. All polls are subject to potential sources of error.

*In view of the online panel methodology, scaling up to population estimates isn’t strictly appropriate. However, if results were viewed as fully representative of the GB 18-75 population, this 7% would equate to c. 3.3m people stating they or someone in their household have borrowed from such a lender (based on the ONS 2021 mid-year estimate of 46.6m for GB population aged 18-75).

Attention: We have been informed of fraudulent activity where people are offering unsecured loans using our name.

Please be careful as we do not provide loans or contact customers for this purpose. If you've been approached, please report to Action Fraud immediately via their website or on 0300 123 2040.