UPDATE: FCA fines TFS £880,000.
On 10 June 2022, the FCA announced:
TFS Loans Ltd (in administration) has been fined £811,900 by the Financial Conduct Authority (FCA) in relation to deficient affordability checks on 3,150 guarantors in its consumer credit business. The FCA has also imposed a requirement on TFS to redress the guarantors that were harmed by the firm not conducting appropriate checks.
This fine relates to some loans given between 2015 and 2018.
As TF is in administration, customers with complaints are waiting to see how their complaints will be decided and how much compensation they will get. The FCA has agreed that the fine will only be paid to the FCA if customers are repaid in full, so it won’t reduce the payments customers will get.
TFS Loans Ltd went into administration on 8 February 2022.
TFS was a small guarantor lender. This is the second guarantor lender to go into administration. Buddy Loans went into administration last year. Most of the larger lenders in the market are no longer offering guarantor loans, including Amigo, George Banco, TrustTwo and UKCredit.
TFS loans were pretty typical of the UK guarantor loan market – between £3,000 and £15,000 lent on a 1-5 year term at between 30% and 70% interest, with a representative APR of 39.9%. The FCA describes these loans as “high cost”.
TFS Loans Ltd’s Full Accounts for 2020 were published in December 2021. They said:
- TFS stopped making guarantor loans in March 2020;
- during 2020 TFS received increasing numbers of affordability complaints
- a debt restructuring was being proposed
- the company employed 25 staff.
The audit opinion was “qualified” – that means roughly that the auditors were not confident about the future. The auditors said::
“the ability of the company to continue in operational existence is dependent on the continued support of the company’s creditors and the full agreement of the proposed restructuring deal, without which the company may not be able to continue as a going concern.”
Several Debt Camel readers have had problems being paid in the last few weeks by TFS, so their collapse into administration is not a surprise. This article looks at the implications for them and for all other TFS customers.
Affordability complaints against TFS
The TFS website said:
A guarantor loan is an alternative way of lending that can provide you with an affordable loan for any purpose…. The loan is based on trust instead of your credit score.
But having a guarantor does not mean that loan can be given that is unaffordable for the borrower. The regulator’s rules say a lender should assess whether a guarantor loan is affordable for both the borrower and the guarantor.
Here are a couple of recent Financial Ombudsman (FOS) decisions against TFS:
- Ms B had had several CCJs and defaults which though not recent were unpaid, TFS did not try to verify her expenses – if they had they would have seen she was gambling regularly;
- Mr L took two loans from TFS. The first was taken only a few months after a recent default and a CCJ. The second loan, to refinance the first and consolidate other debt was taken only a year later after his debts had continued to increase.
Reading FOS decisions, it seems that in some cases TFS lent on the basis that the borrower had an apparently high disposable income, but the Ombudsman pointed out that was not compatible with what the borrower’s recent credit history showed.
What happens in administration
It is the administrators’ role to sell the assets of a company and divide the available money between the company’s creditors. This distribution can take a long time – often more than a year.
The administrators have now published their proposals for the administration.
Anyone who is owed money by a company that goes into administration can make a claim to the administrators. At the moment you can send a complaint by email to firstname.lastname@example.org. The administrators may later put up a page to let people make complaints.
In this case, that includes TFS customers, past and present, borrowers and guarantors. They could all be creditors because they may have a claim against TFS for unaffordable lending.
The FCA has asked the administrators to devise a methodology to work out which customers who were mis-sold loan.
There will not be enough money to repay all the complaints in full in the administration:
- all unsecured creditors who are owed a cash refund get a “pence in the pound” amount that divides up the money the administrators have available.
- this amount can vary from nothing (Uncle Buck), very little (Sunny – 3p in the £), OKish (Swift Sterling 20p in the £) to pretty good (QuickQuid 53p in the £).
- borrowers with an existing loan get the “balance reduction” part in full. Say you owe £1200 and your refund is calculated at £2000. Your balance will be cleared and you will get a small “pence in the pound” amount of the remaining £800 refund.
The loans still exist even though TFS has gone under
Current loans still exist on the same terms. You are not expected to pay the full amount immediately.
The administrators may want to sell the current loans to a debt collector. But they may well wait to sell the loans until claims for unaffordable lending have been determined.
Most debt collectors are a LOT nicer to deal with than most guarantor lenders! And the debt collector will not expect you to repay the full amount immediately.
Should you carry on paying?
The administrators say:
It is important that all customers continue to repay their loans in accordance with the terms of their agreements, as maintaining payments can have a positive impact on your credit score.
But what if you can’t afford to do this?
But if you can’t afford these payments, you may feel that getting behind with other debts in order to pay TFS is not a good idea and it would be better to stop paying TFS.
If the borrower wants to stop paying then the guarantor also needs to decide whether to stop any payments being taken from their account.
To talk your situation through with a debt adviser, borrowers and guarantors can phone National Debtline on 0808 808 4000. You need to talk to your guarantor about this and explain your situation. You and/or your guarantor may be able to make claims to the administrators. If either of you wins that, your guarantor is be released and this just becomes a normal loan for the borrower.
And what if you don’t want to pay more because you think you have a good affordability complaint and you have already repaid more than the amount borrowed? The administrators say that all payments made after the administration date in February will be refunded in full if your claim is upheld and you have already paid more than the amount you borrowed.
The Financial Ombudsman will no longer work on TFS complaints and has returned them to the administrators to handle.
If you have a final decision from an Ombudsman
Now TFS is in administration you will not get paid the cash refund you should have had in full. You are just another unsecured creditor.
The administrators should accept the FOS decision as a claim from you. They should not look to reopen the case and decide what you should get.
Any remaining balance on your loan should now be written off – you should not be asked to continue making payments.
If you have an adjudicator decision TFS has accepted but not paid out
Here too the administrators are likely to accept this decision as a claim from you.
I don’t think many people are in this situation as recently TFS seems to have been rejecting all adjudicator decisions.
If you have an adjudicator decision that TFS rejected
These will have been waiting at FOS for an Ombudsman decision that is not now going to be made.
The administrators will have to decide whether to accept these as decided claims or to assess your claim and whether it should be upheld.
In some cases, TFS had agreed to freeze the account waiting for the ombudsman’s decision, so not asking the borrower or guarantor to pay. I think if you are in this situation and TFS now asks you to start paying, you should make a complaint to the administrators. I hope this won’t happen and the freeze will just continue until your claim is decided by the administrators.
Keep up to date with what is happening
Look out for an email from the administrators or TFS customer services. These emails may go into your spam/junk folders.
This page will be kept updated.
The comments below are a good place to see what other TFS customers are thinking and whether they have been told anything by the administrators.