Guarantor Loan Claims

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2. Unaffordable Lending Claims | Irresponsible Lending Claims
3. Guarantor Loan Claims: Understanding Your Rights and Options

What Are Guarantor Loan Claims?

Guarantor loan claims relate to situations where borrowers or guarantors believe they were sold unaffordable credit. Understanding your rights regarding guarantor loans can help determine whether you have valid grounds for compensation.

Many people don’t realise that guarantor loans are subject to the same responsible lending rules as other forms of credit. Despite having a guarantor—typically a family member or close friend who agrees to make repayments if the borrower cannot—lenders must still ensure the loan is affordable for the primary borrower.

Understanding How Guarantor Loans Work

A guarantor loan functions similarly to standard personal loans, with one key difference: the presence of a guarantor who contractually agrees to cover repayments if the borrower defaults. This additional security often allows people with poor credit histories to access lending.

Key Features of Guarantor Loans

These loans typically involve:

• A primary borrower responsible for repayments
• A guarantor who provides backup security
• Higher acceptance rates than standard loans
• Interest rates that may be lower than other bad credit options
• Legal obligations for both parties

Understanding these features helps identify when lending practices may have fallen short of regulatory requirements.

Regulatory Requirements for Responsible Lending

The Financial Conduct Authority requires all lenders, including those offering guarantor loans, to conduct proportionate affordability checks. These checks must focus on the borrower’s ability to repay sustainably from their income or savings.

Essential Lending Standards

Lenders must:

• Assess the borrower’s financial circumstances thoroughly
• Ensure repayments are sustainable without hardship
• Consider existing financial commitments
• Identify any signs of financial distress
• Avoid lending to those with serious underlying problems

The presence of a guarantor doesn’t exempt lenders from these responsibilities. Borrowers with existing financial difficulties shouldn’t receive loans simply because someone else might cover the repayments.

Identifying Mis‑Sold Guarantor Loans

The Financial Ombudsman Service has provided clear guidance through various decisions about what constitutes irresponsible guarantor lending. In one significant ruling, the Ombudsman stated:

“The information provided also shows that Miss H was gambling unsustainable amounts of money. In these circumstances, I don’t think that Amigo would have lent if it knew, as I think it ought to have, that Miss H’s ability to repay this loan would, to all intent and purpose, be based on her success as a gambler.” https://www.financial-ombudsman.org.uk/decision/DRN3022492.pdf

This demonstrates how lenders must investigate borrowers’ financial circumstances thoroughly, including identifying problematic spending patterns.

Warning Signs of Irresponsible Lending

Common indicators that guarantor loans may have been mis‑sold include:

• Pre‑existing unmanageable debt levels
• Insufficient income verification
• Failure to identify gambling or addiction issues
• Overlooking clear signs of financial distress
• Relying solely on the guarantor’s ability to pay

The Claims Process Explained

Understanding the guarantor loan claims process helps both borrowers and guarantors make informed decisions about their options. The process follows established procedures designed to ensure fair treatment.

Initial Review Stage

The first step involves examining the lending decision and circumstances surrounding the loan. This includes reviewing application details, affordability assessments conducted, and the borrower’s financial situation at the time.

Formal Complaint Submission

If evidence suggests irresponsible lending, a formal complaint can be submitted to the lender. This should detail how affordability checks may have been inadequate and the impact of the unaffordable lending.

Lender’s Investigation

Lenders must investigate complaints thoroughly and provide a Final Response Letter. This response should address all concerns raised and explain their decision regarding the complaint.

Ombudsman Referral

If the lender’s response proves unsatisfactory, complainants can escalate to the Financial Ombudsman Service. This independent body reviews evidence from both parties before making a binding decision.

Rights for Borrowers and Guarantors

Both borrowers and guarantors have rights when loans prove unaffordable. Understanding these rights helps determine the best course of action.

Borrower Rights

Primary borrowers who received unaffordable loans may be entitled to:

• Refund of interest charges paid
• Adjustment of outstanding balances
• Removal of adverse credit information
• Compensation for distress caused

Guarantor Considerations

Guarantors who’ve made payments on mis‑sold loans may also have claims, particularly if:

• The lender failed to explain risks properly
• Affordability checks were inadequate
• They weren’t informed about the borrower’s financial difficulties

Potential Outcomes of Successful Claims

When guarantor loan claims succeed, various forms of redress apply depending on individual circumstances. Understanding potential outcomes helps set realistic expectations.

Successful claims typically result in interest refunds on loans deemed unaffordable. Additional compensation may apply where significant distress or inconvenience occurred. The specific outcome depends on the extent of irresponsible lending identified.

Your Options Moving Forward

Whether you’re a borrower or guarantor concerned about past lending, several options exist for addressing potential mis‑selling. Taking time to understand these options ensures informed decision‑making.

Remember, you can complain directly to your lender and subsequently to the Financial Ombudsman Service without charge. Some people prefer professional assistance to handle the process, though this involves fees.

Major Guarantor Loan Lenders

If you’ve had guarantor loans with any of these prominent lenders, you may wish to explore whether grounds for a claim exist:

• Amigo Loans – Learn about Amigo guarantor loan claims
• George Banco – Information on George Banco guarantor loan claims
• TFS Loans
• Buddy Loans
• UK Credit – Explore UK Credit guarantor loan claims

Next Steps

Understanding guarantor loan claims empowers you to make informed decisions about your situation. Consider these steps:

• Review your loan agreement and application details
• Gather evidence of your financial situation when borrowing
• Assess whether proper affordability checks were conducted
• Determine if you experienced financial difficulty with repayments
• Research your options for making a complaint

Remember, you have the right to complain directly to your lender and to the Financial Ombudsman Service without using a claims management company. However, if you want to reduce stress, don’t have the energy or the free time, Allegiant could help you make a claim.