Loan Sharks in South Africa

In South Africa, It’s a criminal offence to lend money for profit without a consumer credit license, although it’s not illegal to borrow from such a company or person. Someone who engages in unlicensed lending is typically known as a loan shark.

Can a loan shark take you to court in South Africa?

No, a loan shark cannot take you to court.  It’s illegal to lend money without a license, but it’s not illegal to borrow money from a loan shark. You don’t necessarily have to pay the money back. Bear in mind that, if the money was lent illegally, the loan shark has no legal right to collect it and “they can’t take you to court to get it back”.

How do I identify a loan shark in South Africa?

Loan sharks often lend money alongside another legal or illegal business. The methods they use to lend and collect money vary a lot. These are some of the warning signs to watch out for that a lender is acting illegally:

• Giving you no paperwork or agreement on a loan
• Refusing to give you information about the loan
• Keeping items until the debt is paid, such as your mobile phone or cash card
• Taking things from you if you don’t pay on time
• Adding more interest or charges so the debt never goes down
• Using intimidation or violence if you don’t pay.

What does the law say about loan sharks in South Africa?

According to South African law, Loan sharks do not operate legally. This is because it is illegal to lend money without a license. But it is not illegal to borrow money from a loan shark. Bear in mind that, the loan shark would not have any legal right to take you to court if you cannot pay back the loan

What are the disadvantages of borrowing from a loan shark in South Africa?

The following are some of the risks associated with borrowing money from a loan shark:

• A high and often unmanageable interest rate. Loan sharks charge much higher interest than a high street lender would charge you.
• Being harassed or threatened if you fall behind on payments.
• Coming under pressure to borrow even more money to repay your original loan. Doing this gives the loan shark more ‘power’ over you, and makes you more vulnerable to intimidation and violence.
• When you first meet them, loan sharks will usually seem friendly and understanding to your problems. They do this to gain your trust and make you more likely to borrow money from them. They may even behave nicely after a period of intimidating behaviour, to keep you off balance and ‘train’ you to stay on top of your repayments.

Where can I report loan sharks in South Africa?

You can report Loansharks to the NCR(National Credit Act) and the South African Police Service.