If you are a guarantor for a loan you can ask to be removed as the guarantor:
- if you couldn’t afford to repay the loan without difficulty; or
- you were pressured into becoming the guarantor; or
- you didn’t understand the implications of being a guarantor.
A lender such as Amigo should have checked that a loan will be affordable for both the borrower and the guarantor before the loan starts and before any top-ups.
The regulator’s definition of affordable is that you have to be able to repay it on time without it leaving you so short of money that you have to borrow more, get behind with bills or sell your house.
In summer 2019, the Finacial Ombudsman published an important decision in a case where a guarantor said she should never have been accepted as guarantor, see Amigo – why the Ombudsman released a guarantor from a loan.
This article has a template letter you can use to complain to the lender.
You can complain if the borrower is still paying the loan or if they have stopped and you are being asked to pay it. You can also complain if you have been taken to court for a CCJ or a charging order, see Is it too late to complain after a CCJ? which looks at this situation.
- does not apply if you have given a personal guarantee for a business loan.
- does not apply if you are the borrower – then you have different reasons to complain, see How to complain if you have got a guarantor loan which has a different template.
Reasons to complain
There are a lot of reasons to argue that a lender should not have agreed to give a loan with you as the guarantor.
Mention all the ones that apply to you! You may be most upset about the way you were talked into being the guarantor, but often it is the affordability complaint which is easiest to win.
But don’t try to stretch to include them all – you can win your complaint with only one of these.
There may be other reasons as well. You know your own case best – if something didn’t feel right to you, mention it.
a) The loan was unaffordable for you
Before agreeing to lend, Amigo and other guarantor lenders should have checked that you would be able to make the repayments if the borrower could not:
- they should have asked about your income and your expenses, including rent/mortgage and utilities as well as food, transport, clothes, children’s expenses, your other debts and everything else you spend money on;
- guarantor loans are large, long-term financial commitments. Not a £200 payday loan. I would expect a lender to ask for evidence of your income and to have checked your credit record to see what other debts you had. If your income may change over the term of the loan, the lender should have thought about this, for example if you may not always be able to get overtime.
If you could only manage to make the loan repayments by borrowing elsewhere or getting behind with bills, then the loan was not affordable for you.
Here are some recent Ombudsman decisions about whether an Amigo loan was affordable for the borrower – they show the sort of things FOS looks at when it considers if a loan was affordable.
Amigo says a guarantor
must be able to afford the monthly payments and still have enough money to live their normal life.
So the expenses taken into account should have been what you were actually spending. They can’t say the loan would be affordable if you stopped smoking or didn’t give your children pocket money.
When the guarantor is a homeowner, that’s nice for the lender as it’s extra security. But owning a house doesn’t always mean you can manage the loan repayments! The regulator’s rules say that a loan has to be payable out of income and/or available savings, without having to sell or remortgage your house.
Was your credit record good? Amigo says:
Your guarantor doesn’t need to be a homeowner, we can still accept those who rent, but they will need to have a strong credit history.
A guarantor is supposed to be a person who doesn’t have money problems who can easily step in if the borrower gets into difficulty. If your credit record shows you have money problems, then you probably weren’t suitable to be a guarantor.
If you have other financial links with the person borrowing the money, the lender should have also looked at how your financial situation would be impacted if the borrower couldn’t pay the loan.
Very often if the borrower can’t pay the guarantor loan, it may have been because you two have split up, or they have lost their job or some other financial problem.
So when the lender was thinking if you could afford to make the loan payments, they can’t assume the borrower was still paying half the rent, repaying you for car finance you took out for them or paying you child maintenance.
c) a top up to a previous loan wasn’t properly explained to you
Just because you agreed to the first loan, doesn’t mean the lender can assume you will be the guarantor of a top up. The lender should have checked you were happy with this and that you could afford it – your circumstances may have got worse since the affordability check on the original loan was made.
The lender should also have explained clearly what the new loan was. It may be that you thought you were only now being asked to guarantee the “extra money” because the old loan was being cleared. So if £1500 was being transferred into your account for the top up, you may have thought that was now the new loan. the lender should have made it very clear to you in the phone call, as well as the small print, that you were actually going to be liable for say £6400 as the rest of the money was being used to repay the previous loan.
d) You were pressured into becoming a guarantor
I’m not talking here of your sister or a friend asking you to be their guarantor and you finding it a bit difficult to say “No”. But too often people can be put under pressure or bullied into agreeing to be a guarantor. Here are some examples:
- being asked by your manager or a colleague at work and thinking your job could be affected if you said No;
- being asked by the manager of your sheltered housing;
- being asked by someone you rely on for help, eg a caregiver if you are elderly or disabled;
- being asked by someone why you rely on for help with your finances – your partner that pays half the bills, your ex that is paying you child maintenance;
- if you were in an abusive relationship with your partner. The abuse doesn’t have to be physical, it can be financial, see Financial Abuse: How to tell if your partner is a money bully.
If any of these apply to you, you should mention it in your complaint. Don’t worry about how you can “prove” this, just say what happened and what you were worried about.
Sometimes people were literally told what to say on their expenses form and on the phone by the borrower – say if this happened to you.
e) You didn’t properly understand what being a guarantor meant
Everyone knows what taking a loan means. But being a guarantor is unusual and the lender should have explained what it meant in detail and in words that you could understand.
Lenders have to make sure you understand what you doing when agree to be a guarantor. So here are some good reasons to complain if they happened to you:
- your English is poor (perhaps a friend is helping you with the complaint, perhaps the borrower translated things for you when the application was made);
- you find it difficult to understand complicated money decisions;
- you thought you were just being asked to provide a character reference for the borrower; and didn’t realise you might have to repay the loan;
- you thought when you gave the money to the borrower and they started paying the loan it became their loan and you were no longer responsible;
- you thought you would only have to pay if the borrower died or went bankrupt.
- you didn’t realise that Amigo would ask you to pay if the borrower offered a payment arrangement because the Amigo website said wherever possible, we will always work with the borrower first and come to an arrangement before looking to the guarantor to pay;
- the paper documentation was too hard to understand.
What would a “fair solution” be?
If you should never have been a guarantor because you were forced to agree or the loan was unaffordable for you, the correct solution is for you to be removed as the guarantor. Then the loan turns into a “normal” loan from Amigo to the person who borrowed the money.
If you have made any payments, these should be refunded to you and any problems on your credit record should be deleted.
This will remove the problem for you. It will also make the borrower’s life easier! They will be able to sort out their financial problems without worrying that it will affect you, for example by including the loan in a debt management plan or bankruptcy.
How to complain
You should complain to the lender. Email is best, see Email addresses for guarantor lenders for the right email to use.
I suggest putting COMPLAINT BY GUARANTOR as the email title. Here is a template with blanks for you to fill in.
These cases are very individual – no one will include everything in this template, just delete what doesn’t apply to you and if there is anything else you think matters, add that!
Lenders often say No to good cases – go to the Ombudsman
Lenders frequently reject a complaint even if you have a strong case. So don’t be disheartened if this happens.
If they send you a long reply which makes it sound as though your complaint has no chance, ignore it! They are hoping you will give up.
When the lender says No (or if you haven’t had a reply within 8 weeks) you can send your case to the Financial Ombudsman (FOS).
FOS is very friendly. You just have to say what happened and why you feel it is unfair. You don’t need a solicitor to help you do this. You don’t have to argue a legal case or say what rules your lender has broken.
If you aren’t sure whether to send your case to the Ombudsman, ask in the comments below this article.
Summer 2019 – people are winning more guarantor loan complaints
It used to be rare to win a complaint against a guarantor lender, by the borrower or the guarantor. But from May 2019 there have been a string of good results from FOS against Amigo and other guarantor lenders such as UK Credit.
Many of these have been borrower complaints but here are two guarantor examples:
- an Ombudsman’s decision in a case where the guarantor, Miss W, had used the template letter on this page. The ombudsman decided that the loan was unaffordable for her AND had not been properly explained to her. She was removed as guarantor for the loan.
- a reader saying that Amigo has removed him as the guarantor when he complained.
Getting help with this
If you would like some help go to your local Citizens Advice. Citizens Advice can also help you to draw up an Income & Expenditure statement to be included with your complaint.
I strongly suggest you do this if any of the following situations apply:
- your case involves Financial Abuse or if you find it difficult to make money decisions – although a complaint from you should be taken seriously, these are situations where Citizens Advice could be a real help;
- a court case is underway or being threatened. Citizens Advice can help you get a court case “stayed” – that is the legal term for put on hold – whilst a complaint goes to the Ombudsman.