Amigo and other guarantor loans are very expensive and the lender often doesn’t check properly that you can afford the loan repayments.
Guarantor lenders should have made sure a loan was affordable before giving you the money. 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 or get behind with bills.
This article looks at how borrowers can complain and has a template letter. You can make this complaint:
- if you are still paying the loan,
- if you have stopped and your guarantor is having to pay, or
- if the loan has been repaid (but probably not if it was taken out more than 6 years ago.)
The lenders normally reject these complaints, but you can then go to the Financial Ombudsman and in June 2019 there are reports of more borrowers winning these cases. Read the comments below this article for details.
If you are not the borrower but the guarantor, read Complaining if you are a guarantor not this article, as the points you can make in a complaint are different.
What should the lender have checked?
Before agreeing to lend, the lender should have checked that you would be able to make the repayments. This is not just for the first month but also that you were likely to be able to continue to afford them for the whole length of the loan.
You should have been asked about your income and your expenses, including rent/mortgage, council tax, utilities, food, transport, clothes, your other debts and everything else you spend money on.
Guarantor loans are large financial commitments. I would expect a lender to have asked for evidence of your income, such as payslips or bank statements 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. You may have managed to repay the whole loan with difficulty because you didn’t want your guarantor to be affected – just making the payments doesn’t prove the loan was affordable!
Some things the lender may have got wrong
- They may only have run a quick check on you because there was a guarantor. This isn’t right – it doesn’t matter how well off your guarantor is, the loan had to be affordable for you!
- You may have given answers to questions about your expenditure that were too low, either because you were guessing or because you really wanted the loan and you said what you thought they wanted to hear. If the figures looked too low the lender should have checked further – you really only spend £40 a week on food for you and the two children? No transport costs at all? Never buy any clothes? If you have disability benefits, do you not have any extra expenses because of these? If you have children, think about uniform costs, pocket money etc
- You may not have mentioned some of your other debts – if what you told the lender didn’t match with what they could see on your credit record, again they should have double checked this.
- Was your income regular? If you were self-employed or had overtime that varied, the lender should have looked at how much your income had varied in the past.
- Were there a lot of recent applications for credit or recent debt problems on your credit record? Guarantor loans are aimed at people with bad credit scores, but the lender should still have taken account of recent new problems.
- If you were topping up an existing loan, the lender should have run another set of checks to make sure this was affordable. They should also have taken into account if you hadn’t made the previous loan repayments to them on time. And if you had said the first loan was to consolidate debt, does your credit record show that you didn’t do this and now have more debt?
These complaints are very individual. If you feel there was something unfair about your case and it isn’t listed here, add that into your complaint as well!
What would a “fair solution” be?
Assuming the lender or the Ombudsman decides the loan wasn’t affordable, what happens depends if the loan has been repaid or not.
The loan has been repaid, then any interest paid should be refunded to you (or to the guarantor if they had to make some of the payments).
The loan is still outstanding, then interest should be removed from the balance that is owing, so you only repay what you borrowed. And the lender should agree to accept an affordable monthly payment from you to pay this off, not go after the guarantor.
You guarantor is paying the loan the interest should be removed from the balance owing AND the guarantor then has a very good case to ask to be removed as the guarantor because the lender did not check that you could afford the loan.
Will complaining affect your guarantor?
The complaint itself will not affect your guarantor – they shouldn’t even be told that you have complained.
However, if you stop paying the loan when you make a complaint, the lender may decide to get your guarantor to pay it. So if you don’t want this to happen, you have to somehow carry on making the payments.
If you can’t afford to carry on paying and you don’t want to hurt your guarantor, this is a very difficult situation. I suggest you should talk to a debt adviser about all your options. Here making an affordability complaint isn’t going to make your position any worse, but it isn’t an immediate escape from your problem. If you do win the complaint that will of course help, but this could take many months as your case will probably have to go to the Ombudsman (see below).
One thing to think about is whether your guarantor also had a good reason to complain – see Complaining if you are a guarantor for details. If they win a complaint, they may be removed as a guarantor, which would take a lot of pressure off you.
If you have other high-cost debt such as payday loans, then getting refund for those could provide you with some money to help pay the guarantor loan.
How to complain
It’s best to complain to the lender by email – here is a list of their email addresses. I suggest SUBJECT ACCESS REQUEST AND COMPLAINT BY BORROWER as the email title. Here is a template you may find helpful.
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!
Copies of personal information (SARs) are often sent out by post, so if you have moved, make sure the lender has your new address.
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 showing how unaffordable the loan is.
If the lender rejects your complaint, go to the Ombudsman
Don’t be surprised if Amigo or another lender says some variation on No, the loan was affordable or The regulator doesn’t say we have to check your payslips or bank accounts. In id 2019 the lenders appearing to be rejecting almost all complaints and hoping you will just give up.
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 (FOS). This is free to do.
If you aren’t sure what to do, ask in the comments below this article.
You can simply send FOS a copy of the complaint you sent the lender, but if you disagree with anything the lender said in their rejection to you, mention that as well.
If you have been sent a copy of your personal information, work through that and note anything in there that the lender seems to have ignored in approving your loan. For example any indications that your income was lower or your expenses or debts were higher than your application suggested.
You don’t need a solicitor to help you do this. You don’t have to quote laws or regulations. It’s best to keep your complaint in plain English. The ombudsman just wants you to say what happened to you and why you feel it is unfair.
Don’t delay in sending a case to FOS. While you have an “open” complaint, with the lender or at FOS, the lender cannot start court action. If you don’t yet have your personal information back from the lender, don’t decide to wait for this. Send the case to the Ombudsman immediately and you can later send extra details to be added to your FOS case file.
How likely is this to work?
I’m not going to say everyone who complains will win their case! But from May 2019, a lot more complaints by borrowers are being upheld at FOS.
So far all the recent decisions have been “from an adjudicator” which is the first stage at FOS. These decisions aren’t published by FOS. But if you read the comments below this article from readers, you will see how they are getting on with their complaints.
It is much simpler to try to win a case at FOS than a court case. If Amigo or any other lender has already started a court case against you, Citizens Advice can help you get the court case “stayed” (that’s legal jargon for put on hold) while you take an affordability complaint to the Ombudsman.
Getting help with these cases
If you want help with complaining to a lender or sending a rejection to the Ombudsman, Citizens Advice can help. Every Citizens Advice has access to the national Specialist Debt Advice Service if this isn’t something an adviser has come across before.
Do not use a Claims Firm or a solicitor that is acting as a claims firm. There are two good reasons why you should avoid them like the plague for these cases:
- they will probably do a very poor job. They are not experts, they just send off a standard letter. They won’t put time into looking at your personal information situation and seeing where the lender ignored warning signals. These complaints are VERY individual, not a simple checkbox exercise like PPI.
- if you win a case but still owe a balance, this is usually just reduced. But the claims firm will expect you to pay their high percentage fee immediately even though you have not received any cash refund and still have the rest of the loan to pay. I have seen people end up with a CCJ when they haven’t been able to pay the claims company fee.