BRITS can claim compensation worth thousands of pounds as complaints over guarantor loans more than double.
Consumers who were mis-sold loans can claim a refund – we explain how.
The Financial Ombudsman Service received 16,500 complaints about guarantor loans last year, according to figures from audit firm Mazars.
That’s a jump of 178% compared to the previous year, when 5,900 complaints were filed.
It comes as more borrowers fail to meet repayments, meaning lenders chase the guarantor for the money.
Guarantor loans are targeted at people who can’t borrow from other sources due to poor credit history or a low income.
It involves another person, such as a friend or family member, pledging to make the repayments if the borrower can’t pay.
If complaints are upheld, lenders are sometimes forced to pay compensation to customers and guarantors.
The research showed that reasons for the complaints include allegations that the borrower would never be able to afford to repay the loan.
Another reason was that the guarantor was pressured into taking on the responsibility, or didn’t know what the role meant.
Paul Rouse, partner at Mazars, said: “After taking a lenient approach during Covid, lenders are now coming beginning to pursue guarantors for payment.
“That is playing a role in the huge spike in complaints.”
A high number of complaints have pushed some guarantor loan firms into administration after they were unable to meet compensation demands.
High cost lender TFS loans appointed administrators this month following unaffordable loan claims.
Meanwhile, consumers who were mis-sold loans by Satsuma or Provident have until Monday (February 28) to file a compensation claim.
Some doorstep loans from Provident and Greenwood, payday loans given by Satsuma and guarantor loans from Glo were mis-sold to cash-strapped borrowers who couldn’t afford them.
If you took out a loan with one of those companies between April 6, 2007 and December 17, 2020, you could get a pay out.
How to get compensation if you’re a borrower
You could get a payout if you were mis-sold a guarantor loan or were treated unfairly by the lender.
You can make a claim even if you’re still repaying the loan or you’ve already paid it off.
First, you need to work out if you were mis-sold a loan.
Start by looking back through your old bank statements from when you borrowed the money – you should be able to access these through online banking.
If you were struggling to afford the repayments, then you were mis-sold the loan.
That includes if you were cutting back on other essential expenses such as food, rent and bills.
The lender should never have given it to you if you weren’t able to afford the repayments.
You were treated unfairly if the lender failed to help you when you were told them you were struggling to pay it back.
This includes failing to put you on a different payment plan, using a debt collection agency without offering alternative solutions first, or seeking payment from your guarantor too quickly.
How much you are owed from the lender depends on your individual case, but it could be worth thousands of pounds.
But you won’t get the full loan amount back.
You’re likely to be refunded the interest you paid plus any fees you were charged, such as for late payments.
You can also claim 8% interest per year for each payment made from the date they were paid to the settlement date.
Borrowers can also ask for black marks for missed payments to wiped from credit reports.
If you’re a guarantor
If you acted as a guarantor for someone but couldn’t afford the repayments either, you may also be able to make a claim.
There are four main reasons for a guarantor to complain, according to MoneySavingExpert. These include:
- Being able to afford the repayments
- If the lender never explained to you properly what being a guarantor entails, or they failed to let you know when the borrower was taking out a top-up loan
- You were pressured into being a guarantor, for example by a work manager putting your job at risk if you refused
- You had other financial links to the borrower when you applied for the loan that would impact your ability to make the repayments, such as you were both on the same rental agreement.
The outcome of your complaint will depend on the seriousness of the impact it had on you
But you may be entitled to a full refund of any payments you made on the borrower’s behalf, including interest.
You can also get a refund of 8% interest per year on payments from the date they were paid to the settlement date of your complaint.
You will also be released from the responsibility of being a guarantor and can ask for your credit file to be adjusted.
How to make a complaint
It’s free to make a complaint if you think you were mis-sold a guarantor loan or you were treated unfairly.
You don’t need to use a claims management firm, which charge hefty fees – some as much as 30% of your payout – for the service. On a £1,000 payout, that’s worth £300 in fees.
It’s free to make a complaint to your lender and you don’t need any supporting evidence, just a clear description of why you feel you’ve been mistreated.
You will need to do this in writing via email or letter – you can find the address of where to send it to on the lender’s website.
You will need to include information such as how much the loan was for and when it was taken out, and explain that it is an affordability complaint.
If you don’t hear back from the lender within eight weeks, you can escalate your complaint to the Financial Ombudsman Service (FOS).
Alternatively, MoneySavingExpert and complaints site Resolver have a free tool you can use to build your case.
It will also remind you to report your case to the FOS after eight weeks.
We pay for your stories!
Do you have a story for The Sun Online Money team?