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! There is a template letter in this article for you to use.
You can get a refund of the interest you have paid, or an existing loan reduced so you only repay the amount you borrowed.
Amigo, the largest lender, is now agreeing with many complaints. But if your complaint is rejected send the case to the Financial Ombudsman (FOS).
FOS statistics published in August 2019 show that they are upholding a massive 83% of guarantor loan complaints.
If you are not the borrower but the guarantor, read Complaining if you are a guarantor which has a different template letter to use, as the points a guarantor can make 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.
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.
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 plus 8% statutory interest added.
What should the lender have checked?
Before agreeing to lend, the lender should have made sure you would be able to make the repayments 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.
What did your lender get wrong?
- They may only have run a quick check on you because there was a guarantor. 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, because you were guessing or because you were desperate. If the figures looked too low the lender should have checked further.
- You may not have mentioned some debts. If this 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 recent applications for credit or recent problems on your credit record? Guarantor loans are aimed at people with bad credit scores, but the lender should have been careful if your position looked as though it was getting worse.
- When you top up an existing loan, the lender should run another set of checks to make sure this was affordable. Did you miss any previous loan repayments? Had your finances got worse since your first loan? The lender should have realised their current loan may be unaffordable for you and not given you more money.
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. The lender should accept an affordable monthly payment from you to pay this off, not go after the guarantor.
Will complaining affect your guarantor?
The complaint itself won’t affect your guarantor if you carry on making the payments. The guarantor should not be told you have complained.
But if you stop paying the loan when you make a complaint, the lender may decide to get your guarantor to pay it. If you don’t want this to happen, you have to somehow carry on making the payments even though it’s hard.
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 your options. Making an affordability complaint won’t make your position worse, but it isn’t an immediate escape from your problem.
Think about 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 will 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 template complaint to use
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.
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 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 get the statements as they help a lot if your case has to go to the Ombudsman.
When you get the personal information (SAR) back
Copies of personal information (SARs) are often sent out by post, so if you have moved, make sure the lender has your new address. You should get the information within 30 days. It is often sent on a CD with a password.
This information is not the lender’s response to your complaint. Most lenders will send that separate from the SAR, usually a few weeks later.
You don’t need to do anything with the SAR, just keep it safe. You have asked for it now so that you have the details in case the lender rejects your complaint or makes a poor offer so your complaint 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 many complaints and hope you give up.
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. But 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 of guarantor loan complaints are being upheld at FOS. It’s not like payday loans, these guarantor loans are large and you can win your case if you only had one loan.
Here is my summary of a few recent FOS cases Amigo – more refunds being paid!
There has been one decision “from an ombudsman” against Amigo that has been published. That explains how poor Amigo’s affordability checking was, see Ombudsman – Amigo did not check properly that a borrower could afford the loan for details.
I’m not going to say everyone who complains will win their case, but this is very good news!
It is much simpler 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 won’t put time into looking at your personal information. 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.