YOU MAY HAVE A CLAIM FOR COMPENSATION

Claim a Guarantor Loan Refund

If you have previously had a guarantor loan that you struggled to repay you could get back £100’s or even £1,000’s in compensation. Some guarantor lenders are going into administration which means you should act now if you want to secure the maximum compensation payout you could be entitled to.

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What is a guarantor loan?

Unlike payday loans, guarantor loans are much longer. Instead of just a month, guarantor loans are typically 12 months or longer and require a signature of a ‘guarantor’ who promises to repay the loan if you can’t.

Guarantor loans have less interest to pay than payday loans (59.7% APR compared to eye watering 1,250% for some payday lenders). Like payday loans, guarantor loans are approved within 24 hours and because they have a ‘guarantor’ they are targeted at people with poor credit history.
With a guarantor loan you can typically borrow anything between £1,000 to £7,500 over a period of 1 to 5 years.

In this section

› Guarantor Loans

› How to check you had a guarantor loan

› The companies you can claim against

› Checking you have a valid claim

› The legal bit

› The evidence you need

› Common questions

› Typical claim payout

How to check you had a guarantor loan

You can quickly check to see if you had a guarantor loan by following these simple steps.

Check your email

Search for the names of guarantor loan companies you think you may have used in the past. If you find any emails, search for keywords like ‘credit’, ‘loan’ and‘ statement’. If the company is emailing you statements of your account it’s proof you have a credit account with them.

Search your credit record

Use this free credit check tool to check your credit history for the last 6 years. See if any credit was ‘repaid’. Remember you can still get compensation from loans older than 6 years and even if the loan hasn’t been repaid in full, although it’s likely to be much less.

Check your bank statements

Looking through your old statements is often an easy way to find out if you had a loan. Don’t worry if you no longer have them, due to GDPR regulations you can request a copy by submitting a Subject Access Request (SAR) to the bank. Once you have them look for money going in and then money going out each month (a typical pattern for loan or credit facility).

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Guarantor Loan Refund Calculator

You can quickly check to see how much you could be entitled to by using our loan refund calculator.

“Rules imposed by the Financial Conduct Authority mean any firm offering credit has an obligation to check your financial situation to make sure you could afford the credit they were providing, before giving it to you.”

Key Fact

The Financial Ombudsman Service (FOS) reviews complaints made about firms by checking if their terms and conditions were applied fairly – and whether any charges were clearly explained.

The legal bit

The basis of any claim is split into two arguments. First, did the lender properly assess your 'creditworthiness' before lending to you know as 'unaffordable lending'? Second, how did the lender treat you known as 'unfair treatment'.

Unaffordable Lending - “Assessing Creditworthiness”

The FCA sets out in Chapter 5 of the Consumer Credit sourcebook (CONC) that before anyone enters into a regulated credit agreement, they must first be assessed for ‘creditworthiness’. This ‘assessment’ must be repeated for any ‘significant’ increase in credit or credit limit given in the future (CONC 5.2A.4 ). The FCA does not prescribe what checks should be made by firms, it just says checks should be ‘reasonable’ and ‘proportionate’ to the type and amount of credit, it’s cost and the customer’s financial position (CONC 5.2.3G ); this is called the firm’s “affordability risk”.

What checks the firm should carry out are covered in CONC 5.2A.20R (Scope, extent and proportionality of assessment). The FCA does state that creditworthiness checks should take into account (where appropriate) information from the customer and credit reference agency (CONC 5.2A.7R )

Repayment Checks

A firm must consider the customer’s ability to make repayments from:

Income
Income from savings
Savings or other assets indicated to be used to repay the debt
Without having to borrow more to meet repayments
Without failing to make other payments contractual obliged to meet
Without the repayments having a significant adverse impact on the customer’s financial situation.

Assessing Income

The firm must take reasonable steps to determine the amount, or make a reasonable estimate, of the customer’s current income and reasonably foresee a likely drop in future income. For the purpose of considering the customer’s income under CONC 5.2A.15R it is not generally sufficient to rely solely on a statement of current income made by the customer without independent evidence (for example, in the form of information supplied by a credit reference agency or documentation of a third party supplied by the third party or by the customer).

Assessing Expenditure

Non-discretionary expenditure referred to in CONC 5.2A.17R includes payments needed to meet priority debts and other essential living expenses and other expenditure which it is hard to reduce to maintain a basic quality of life. It also includes payments the customer has a contractual or statutory obligation to make, such as payment obligations arising under a credit agreement or a mortgage contract.

Use of Credit

The FCA states (CONC 5.2A.21G ) that firms ‘may’ have ask how the customer intends to use the credit. Debt consolidation loans are allowed, but this shows existing financial difficulty which should spark further creditworthiness checkers by lender. The FOS has ruled in the past in favour of claimants where this information was provided and not acted upon.

Extended Credit

If the lender encouraged you to borrow further with ‘good customer’ offers or didn’t inform you of the risks of borrowing more or didn’t check your affordability to increase your limit, you may have a claim.

Unfair Treatment - “How the lender acted”

The list below sets out additional grounds to complain if you felt the lender retreated you unfairly.

Fair treatment

If you felt pressured to extend your loan or if you felt the lender didn’t listen to you or deal with you “sympathetically and positively”.

Repayment Plan

The lender didn’t freeze charges or you were unable to make payments under a reasonable repayment plan.

Key Facts

The lender should have provided you with a Key Facts Document that details in simple terms all the information you needed to know before signing any agreement, if they didn’t you could have a claim.

Use of Debt Collection

If your lender resorted to using a debt collection agency without first talking to you and trying to create a repayment plan.

No Late Payments Warning

The lender didn’t warn you in their advertising or personal communication what would happen if you missed repayments.

No CPA Warning

The Continuous Payment Authority (CPA) didn’t give you prior warning that it was going to take money from your account.

The evidence you need

All you have to do is show that your guarantor loan company acted ‘irresponsibly’ in providing you with a loan that could not be repaid without ‘undue difficulty’. Get a list of all your guarantor loans together and then write down how much you earned each week or month. After that, detail all your expenses like rent and utility bills (electricity, gas and water) as well as council tax, broadband, mobile phone, car and home insurance, grocery, clothing, childcare, other debts and outgoings. Finally, write a letter to each lender including this information explaining that your loan was unaffordable and ask for a refund.

But don’t worry if this sounds daunting, we do all this for you. Claim online by filling out our form and let our experienced claims team handle the headache and hassle for you.

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Did you know?

On average, the uphold rate for guarantor loan redress claims is 68%.

FOS Quarterly Complaints Data (Q2 2020/21)

Common questions

What else can I claim for?

You can request from the lender to remove any ‘black marks’ or poor payment records’ from your credit report. The lender has to instruct the credit reference agency directly so you have to go through the lender first.

Can borrowers & guarantors claim?

Absolutely. Remember that the guarantor can only claim for issues that impacted them as the guarantor. Likewise the borrower can only claim for issues that impacted them as the borrower. The guarantor couldn’t claim for interest and charges related to the borrower unless they paid them, likewise the borrower couldn’t claim grounds for compensation regarding how the guarantor was treated.

Doesn’t the FSCS cover lenders?

Guarantor loan companies are not covered by the industry safety net provided by the FSCS which means your payout is dependent on the Administrator and not dictated by the industry. So far no guarantor lenders have gone into administration but that doesn’t mean they won’t so it’s wise to get your claim in now.

Can I claim if the lender has gone into administration?

Yes you can but your payout amount is solely determined by how much money is left over and how many creditors want a share.

Should I stop repayments if my lender goes bust?

No, it’s not wise to stop paying any loan repayments unless told to do so by the administrator. Missing payments could just increase your fees and charges further and also adversely affect your credit rating.

Will my guarantor be affected?

No, your guarantor will not be told you have made a complaint unless they have made payments themselves. If you still have a loan and you continue to make repayments, it won’t affect your guarantor in any way.

What happens if I win?

It is likely that you will only have to repay what you borrowed, your guarantor will be released from the loan and you will also get a refund on the interest you paid on the loan. If you have a balance outstanding, it’s likely you’ll only have to repay the loan at a lower interest rate.

How many years can I claim for?

The Financial Ombudsman Service states you have 6 years after the loan was issued or 3 years from ‘when you were first made aware’ you could claim, whichever is longer. This means you have a good chance of claiming loans older than 6 years if you weren’t aware you could claim. We have some claims dating back to 2010, but don’t delay, start your claim today.

Typical claim payout

The FOS says the payout is dependent on how much trouble and upset was caused by being mis-sold or treated unfairly. It also takes into consideration where you would be now if you had been treated correctly from the start. The refund is calculated by adding up all your loan interest as well as any fees and charges. Your original loan will not be refunded and if you haven’t paid it back yet, the balance owed will be taken from any refund you get. On top of your refund you’ll also get interest which is a statutory 8% for every year you had the loan.

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Example Calculation

“If you had a £1,000 refund in fee, charges and interest you would also get £1,000 x 8% = £80 x 4 years = £320. That means in total including compensation you would get £1,320”

Don’t Delay. Check Now.

Don’t miss out on £100’s or even £1,000’s in compensation you could be entitled to. Checking only takes 5 minutes, so why not do it now?

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