What is a guarantor loan?
Some lenders will only provide a loan to borrowers on the condition that another person (for example, a friend or relative) guarantees to make the payments if the borrower doesn’t. The other person providing this guarantee is known as a guarantor. So we call this type of lending a ‘guarantor loan’. This note doesn't cover complaints made by guarantors of loans to businesses.
Types of complaints we see
We receive complaints about guarantor loans from both borrowers and guarantors.
From consumers, we sometimes hear:
- I shouldn’t have been given the loan because I couldn’t afford it and the lender should have known this at the time
- My financial circumstances have changed and I can no longer afford to make the repayments to my loan but the lender isn’t treating me fairly
- I didn’t apply for the loan
- The lender won’t let me include this loan in an Individual Voluntary Arrangement (“IVA”) or bankruptcy
- I’m having problems with my credit file because of the loan
- My guarantor has been contacted too quickly
We also hear from guarantors, who sometimes say:
- I didn’t agree to be a guarantor
- I was pressured or forced into being a guarantor
- It wasn’t properly explained that being a guarantor meant I had to make the payments if the borrower didn’t
- The lender should never have accepted me as a guarantor because I couldn’t afford to make the payments
- The lender should never have given the loan to the borrower in the first place
- My circumstances have changed and I can no longer afford to make the payments
- The lender is threatening to take me to court
- The lender is repeatedly contacting me for payment
How to complain
The first thing you should do is talk to your lender and explain what's happened and why you're complaining. They need to have the chance to put things right. We only look at complaints that a business has had a chance to look at first, unless both sides agree.
The business should look at the complaint within certain time limits and give you their final response, and within eight weeks for most types of complaint.
If you’re not happy with their response, you can bring your complaint to us.
Find out more about how to make a complaint.
What we look at
If you're a borrower who wants to complain about your loan, we'll usually look at whether your lender completed reasonable and proportionate checks before you took out the loan, or whether it has treated you unreasonably or unfairly in some way. When agreeing to your loan, lenders need to make sure you can afford the repayments without too much trouble. So if you're complaining that your loan is unaffordable, we'd expect a lender to show us what checks they did to make sure you could afford to pay it back.
We'll look at similar things on behalf of the guarantor too. If you’re a guarantor complaining that you’re unfairly being asked to make loan payments we’ll usually look at whether the lender completed reasonable and proportionate checks before it lent to the borrower and agreed to you being a guarantor. And whether it obtained your agreement to being a guarantor.
Putting things right
Complaints where we agree you shouldn’t have been provided with a loan
If we think your lender did something wrong or treated you unfairly we’ll ask them to put things right. The exact details of how we’ll ask your lender to put things right will depend on the nature of your complaint, and how you lost out. This might include (if the loan was repaid) asking them to:
- refund any interest and charges you paid adding 8% simple interest; and
- remove any adverse information recorded on your credit file.
Or, where there’s still an outstanding balance:
- remove all the interest and charges added on and make sure the balance is only made up of what was lent to you;
- deduct any payments already made;
- if this means you paid too much, then the extra should be refunded to you adding 8% simple interest.
Sometimes there’ll still be an outstanding balance even after all adjustments have been made. And we’ll usually say that it isn’t unfair for you to pay this back. But there’ll be some rare instances where we don’t think this is fair. This’ll very much depend on what exactly has happened.
We may tell your lender to pay you extra compensation if we think you were caused distress and inconvenience – especially if we find that your lender acted unfairly or unreasonably towards you in some other way.
Complaints where we agree you shouldn’t have been accepted as guarantor for a loan
If we think that the guarantor loan provider unfairly accepted you as a guarantor - we’ll usually say that you should be released from the guarantee. And any payments you’ve made already should be refunded to you adding 8% simple interest.
We’d also usually tell the lender to remove any information added to your credit file.
We may tell the lender to pay you extra compensation if we think you were caused distress and inconvenience – especially if we find that the lender acted unfairly or unreasonably towards you in some other way.
A guarantor says they are unfairly being asked to make the payments when the borrower didn't
Detailed advice for businesses
Businesses can find out more in our detailed information about handling complaints about guarantor loans.