Amigo and other guarantor loans are very expensive and the lender often doesn’t check properly that you will be able to manage the loan repayments without having to borrow more.
If proper checks would have shown that you couldn’t afford the repayments, complain! You can get a refund of the interest you have paid, or an existing loan reduced so you only repay the amount you borrowed.
This article looks at how borrowers can complain and has a template letter.
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.
Summary – guarantor loan affordability complaints
Guarantor lenders should check a loan is 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.
If you win an affordability complaint, the interest is removed from a loan you still owe, so you only repay what you borrowed. If the loan has already been repaid, you get a refund of the interest you paid.
You can make this complaint:
- if you are still paying the loan,
- if you have stopped and your guarantor is having to pay,
- if the loan has been repaid.
Lenders often reject these complaints, but you can then send the case to the Financial Ombudsman (FOS). From May 2019 a lot of people have been winning guarantor loan complaints at FOS.
What should the lender have checked?
Before agreeing to lend, the lender should have checked that you would be able to make the repayments, not just for the first month that you were likely to be able 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. So I would expect a lender to have asked for evidence of your income, to have checked your credit record, and to have verified your expenses.
Just making the payments doesn’t prove the loan was affordable! You may have been repaying with difficulty, taking out other loans, because you didn’t want your guarantor to be affected.
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. Low food costs? 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 your credit record, the lender 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 this.
- 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 have taken account of recent problems.
- When you top up an existing loan, the lender should 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.
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 may 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
A draft complaint
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.
Send bank statements?
You can attach bank statements to your complaint. This helps by showing how unaffordable the loans were. Some lenders such as Amigo often ask for bank statements, so it speeds things up if you send them at the start.
It doesn’t matter if there is gambling showing on the statements – that actually supports your case that they should have made better checks at the start!
Don’t delay starting a complaint if you are trying to get your bank statements. You can always add them later. But now is a good time to start to get the statements as they help a lot if your case has to go to the Ombudsman.
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 bank statements or We based our decision to lend on your application which was inaccurate.
Lenders seem to reject most complaints and hope you will just give up. Some good news is that in June 2019 a few readers have reported that Amigo has given them a refund without them having to go t0 the Ombudsman, but it’s too early to say if this will become common.
If the lender says No, or you haven’t had a reply 8 weeks after sending your complaint, send your case to the Financial Ombudsman (FOS).
This is free to do. You don’t need a solicitor to help you do this. You don’t have to quote laws or regulations. Just use plain English to say what happened to you and why you feel it is unfair. If you aren’t sure what to do, ask in the comments below this article.
You can just send FOS the complaint you sent the lender. If you disagree with anything the lender said in their reply, mention that as well.
Also read How Subject Access Request information can help an affordability complaint which looks at how that SAR information can help. You don’t have to do this – you can keep your FOS complaint short if you want.
Don’t delay in sending a case to FOS. This has to go within 6 months. And while you have an “open” complaint, with the lender or at FOS, the lender cannot start court action.
Are you likely to win your Ombudsman complaint?
From May 2019, a lot more complaints by borrowers are being upheld at FOS.
Most of the recent decisions have been “from an adjudicator” which is the first stage at FOS. When cases are settled here, as 90% of them are, the decisions aren’t published by FOS, but here is my summary of a few of them Amigo – more refunds being paid!
There has been one decision “from an ombudsman” against Amigo that has been published. That goes into great detail about how inadequate Amigo’s affordability checking was, see Ombudsman – Amigo did not check properly that a borrower could afford the loan for details. Another recent ombudsman-level decision is against UK Credit, but that isn’t yet published.
I’m not going to say everyone who complains will win their case, but this is very good news.
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 guarantor loan complaints
If you want help with complaining to a lender, getting a court case put on hold, or sending a case 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 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.