As one door closes – Experiences of illegal moneylending during an emerging cost of living crisis

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.

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.