Answer extracted from The Responsible Finance Podcast — listen to the full episode below.
What illegal money lending reveals about financial exclusion in the UK
Fair4All Finance interviewed 287 people with lived experience of relationship-based illegal money lending across four UK cities. The research upended common assumptions: illegal lenders were not viewed as predatory outsiders, but as the only remaining option after people exhausted friends, family, and mainstream banking channels. A striking finding was the emergence of "parallel lending," where former employees of defunct home credit companies continue lending informally in housing estates.
The research, conducted with lived experience participants from Glasgow, Port Talbot, Preston, and South London, directly challenged the stereotype of the violent, exploitative illegal lender. Instead, the interviews revealed a more nuanced picture of financial desperation and rational pragmatism.
As Neil Alexander explains in the episode, the core driver of illegal lending is not criminal appetite but financial exclusion: when people cannot access credit through legal channels—banks, building societies, mainstream lenders—they inevitably seek it elsewhere.
When legal credit becomes inaccessible, illegal credit fills the gap
The research participants revealed a consistent pattern: illegal lenders became a last resort only after exploring every conventional option. Friends and family networks came first; then came attempts to work with high street banks, building societies, or regulated lenders. Only when all these doors closed did people turn to street lenders or their former employers operating outside the formal system.
The parallel lending phenomenon is particularly significant. Former employees of now-defunct home credit firms like Provident, Morses Club, and Non-Standard Finance have leveraged their existing customer relationships and local knowledge to continue lending from housing estates. This is not an entirely new phenomenon, but Fair4All Finance's research quantified it for the first time, revealing how traditional lending channels' collapse left a void that informal networks were perfectly positioned to fill.
A point detailed in this podcast conversation is that illegal money lending is not a poverty trap unique to the unemployed or severely disadvantaged. The research found that the average illegal loan amount was approximately £3,000, and users had household incomes in the range of £20,000 to £25,000 annually—modest but not destitute. Crucially, about 70% of current illegal lending users were employed.
"If people cannot access forms of credit in a legal way, they will begin to access it in an illegal way."
Neil Alexander — Markets and Consumer Insights Manager, Fair4All Finance. Neil has spent decades working in financial inclusion and community development, tracing his work back to the Tony Blair government's Policy Action Team 14 in 1997 focused on financial exclusion. He was a community worker who helped establish the Westerhales Community Banking Agreement with Bank of Scotland, opening approximately 1,800 bank accounts for unbanked people in an 18-month period. He has subsequently worked as a consultant with multiple CDFIs, for Bank of Scotland, Moneyline, Carnegie UK Trust, and Michael Sheen's End High Cost Credit Alliance before joining Fair4All Finance in August 2021.
The research also uncovered a surprising detail about how illegal lenders operate: borrowers often viewed these lenders with pragmatism, not fear. While the public narrative emphasizes violence and intimidation, the 287 interviewees described relationships that, while informal and risky, were predictable and accessible. Discussed at length in this episode, the implication is clear: mainstream finance's retreat from lower-income communities did not simply leave them without credit—it created space for informal alternatives to flourish.
The Fair4All Finance research also revealed that 52% of people who had previously used illegal lending were no longer doing so, suggesting that as the full conversation makes clear, access to legitimate credit alternatives can break the cycle—but only if those alternatives are genuinely available, affordable, and responsive to the needs of excluded communities.
Key takeaways
- 287 people with lived experience of illegal lending across Glasgow, Port Talbot, Preston, and South London were interviewed; illegal lenders were typically the last resort after exhausting formal options.
- Parallel lending—where former employees of defunct home credit firms continue operating informally in housing estates—emerged as a significant and previously undocumented lending channel.
- About 70% of current illegal lending users are employed, with household incomes of £20,000–£25,000 and average loan sizes of approximately £3,000, challenging stereotypes of who resorts to illegal credit.
- The underlying driver is financial exclusion: when legal credit access closes, informal credit inevitably fills the gap.
See also
How has the decline in home credit availability contributed to illegal money lending?
There has been approximately a 90% reduction in home credit over 10 years. The traditional customer for home collected credit—women in rented housing on low incomes—has been left without accessible formal credit options, driving them toward illegal alternatives.
What is the income range and employment profile of people who resort to illegal money lending?
Research found that individuals using illegal credit had slightly higher income than anticipated, with an income range of £20,000 to £25,000. About 70% of current illegal money lending users are employed, challenging the stereotype that only unemployed people resort to illegal credit.
What regulatory recognition has the HALO certification achieved?
The HALO certification went through a 14-month process with the UK Intellectual Property Office to become a legally recognized trademarked certification, providing a quality standard for responsible finance providers.