What is a guarantor loan?
Some lenders will only provide a loan to borrowers if another person (for example, a friend or relative) guarantees to make the payments if the borrower doesn’t. The other person is known as a guarantor. So we call this type of lending a ‘guarantor loan’. This page doesn't cover complaints by guarantors of loans to businesses.
Types of complaint we see
We receive complaints about guarantor loans from 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 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. This will be 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 complain.
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
- obtained your agreement to being a guarantor.
Putting things right
If we find the business has done something wrong or not treated you fairly, we can tell it what to do to resolve the complaint. There are a range of things we might ask the business to do to put things right, depending on the circumstances.
Our general approach is that the you should be put back in the position you would have been in if the problem hadn’t happened. We may also ask the business to compensate you for any distress or inconvenience you’ve experienced as a result of the problem.
What we ask a business to do, and the amount of compensation we ask it to pay would depend on the particular facts of the case. The following examples give an idea of our approach:
We may ask the lender to:
- refund any interest and charges you paid adding 8% simple interest, and
- remove any adverse information recorded on your credit file
Or, if there’s still a balance to pay, we’ll ask the lender to:
- remove all the interest and charges added on and make sure the balance is only made up of what was lent to you, and
- deduct any payments already made
- If this means you paid too much, the lender should refund the extra to you plus 8% simple interest.
Sometimes there will still be a balance to pay even after all adjustments. We’ll usually say it is fair for you to pay this back. But there will be some rare instances where we don’t think this is fair. This will 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.
If we think that the guarantor loan provider unfairly accepted you as a guarantor, then we’ll usually say that you should be released from the guarantee. Any payments you’ve made already should be refunded to you plus 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
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Information for financial businesses
If you’re a business looking for information to help you resolve complaints or want to find out more technical information, you can find more detail about guarantor loans in the business section of our website.