If you are a guarantor for a loan that you can’t afford to pay without hardship, you can ask to be removed as the guarantor.
A lender such as Amigo should check that a loan will be affordable for both the borrower and the guarantor before the loan starts and before any top-ups. But often proper checks have not been made.
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.
This article looks at how to complain to the lender and has a template letter if you are the guarantor. You can make this complaint if the borrower is still paying the loan or if they have stopped and you are being asked to pay it.
This article does not apply if you have given a personal guarantee for a business loan.
If you are the borrower not the guarantor and the loan is unaffordable for you, read How to complain if you have got a guarantor loan instead of this article.
Reasons to complain
There are three main reasons to argue that a lender should not have agreed to give a loan with you as the guarantor.
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, your other debts and everything else you spend money on;
- guarantor loans are serious long-term financial commitments. 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 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.
Many guarantor lenders say the guarantor has to be a homeowner. But having a house doesn’t 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.
If you have other financial links with the person borrowing the money, I think the lender should have also looked at how your financial situation would be impacted if you split up, or if that person stopped paying part of your bills, or stopped paying you for an existing loan you took for them, or stopped paying you child maintenance… Because if they have defaulted on the guarantor loan that probably means the rest of their finances are in a mess and that may make your finances worse.
A top up to the loan was given without you agreeing
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.
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 – who said they could only carry on doing this if you become a guarantor;
- 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.
A variation on this is where you didn’t know what becoming a guarantor meant, perhaps because it wasn’t explained clearly by the lender in words you understood. This could be because:
- your English is poor;
- 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 weren’t sent any paper documentation or it 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.
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. These complaints are too complicated to try to deal with by phone. Email is best as it is instant and you have a record of what you sent and when, 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!
If you would like some help with this, then 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 recommend you do this if your case involves Finanical 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.
If the lender says No
Don’t be surprised or disheartened if Amigo or any other lender rejects your complaint. There have not been very many of these cases so far, so the lender may hope you will just give up if they say No, they checked everything they should and you could afford the loan repayments.
If the lender says No, or you haven’t had a reply 8 weeks after sending your complaint, you can send your case to the Financial Ombudsman.
The Ombudsman service 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 cite rules that your lender has broken, although I have put a couple in footnotes at the bottom of this article in case you are interested. Citizens Advice can help you with a complaint if you would like.
If you aren’t sure whether to send your case to the Ombudsman, or you have a question about what is happening at the Ombudsman, you can ask it in the comments below this article.
Only a few Ombudsman decisions are published – and the person making the complaint is never named as the Ombudsman service is confidential. Here are a couple of ones that involve a guarantor:
- decision where a guarantor lacked the mental capacity to understand what he was agreeing to
- decision where Amigo did not ask enough questions about expenses for someone who was disabled
Some regulator rules that are relevant to guarantor complaints: