BRITS can seek compensation in the thousands of pounds as claims over the Guarantor’s loans have more than doubled.
Consumers who have been sold incorrectly can request a refund – we explain how.
The Financial Ombudsman Service received 16,500 complaints about guarantor loans last year, according to figures from auditing firm Mazars.
This is a jump of 178% compared to the previous year, when 5,900 complaints were filed.
This comes as more and more borrowers fail to repay, meaning lenders are suing the guarantor for the money.
Secured loans are for people who cannot borrow from other sources due to a bad credit history or low income.
This involves another person, such as a friend or family member, agreeing to make the repayments if the borrower cannot pay.
If complaints are upheld, lenders are sometimes forced to pay compensation to customers and guarantors.
Research has shown that reasons for complaints include allegations that the borrower would never be able to repay the loan.
Another reason was that the surety was pressured to take responsibility or didn’t know what the role meant.
Paul Rouse, partner at Mazars, said: “Having taken a lenient approach during Covid, lenders are now starting to seek guarantors for payment.
“That plays a role in the huge spike in complaints.”
A high number of complaints have pushed some guaranteeing loan companies into administration after they were unable to meet compensation claims.
High-cost lender TFS Loans appointed administrators this month following unaffordable loan applications.
Meanwhile, consumers who were mis-sold by Satsuma or Provident have until Monday, February 28 to file a claim for compensation.
Some home loans from Provident and Greenwood, payday loans from Satsuma, and collateral loans from Glo were mis-sold to cash-strapped borrowers who couldn’t afford them.
If you took out a loan from one of these companies between April 6, 2007 and December 17, 2020, you could get a refund.
How to get compensation if you are a borrower
You could get a payout if you were mis-sold a guarantor loan or if you were treated unfairly by the lender.
You can make a claim even if you are still repaying the loan or have already repaid it.
First, you need to determine if a loan was sold to you in error.
Start by looking at your old bank statements from when you borrowed the money – you should be able to access them through online banking.
If you were having trouble paying the repayments, then you were mis-sold the loan.
This includes if you cut other essential expenses such as food, rent, and bills.
The lender should never have given it to you if you were unable to pay the repayments.
You were treated unfairly if the lender did not help you when you were told you were having trouble paying it back.
This includes not offering you a different payment plan, using a debt collection agency without offering alternatives first, or asking your guarantor for payment too quickly.
How much you are owed by the lender depends on your individual case, but it could be worth thousands of pounds.
But you will not recover the full amount of the loan.
You are likely to be reimbursed for the interest you have paid as well as any fees charged to you, such as late payments.
You can also claim 8% interest per annum for each payment made from the date they were paid until the settlement date.
Borrowers can also request black marks for missed payments to clear credit reports.
If you are guarantor
If you acted as a guarantor for someone but also couldn’t pay the refunds, you might also be able to make a claim.
According to MoneySavingExpert, there are four main reasons why a guarantor complains. These include:
- Be able to pay refunds
- If the lender never fully explained to you what being a guarantor entails, or if they did not let you know when the borrower took out an additional loan
- You have been pressured to be a guarantor, for example by a site manager putting your job at risk if you refuse
- You had other financial ties to the borrower when you applied for the loan that would affect your ability to make repayments, for example, you were both on the same tenancy agreement.
The outcome of your complaint will depend on the severity of the impact it has had on you
But you may be entitled to a full refund of all payments you made on the borrower’s behalf, including interest.
You may also be reimbursed 8% interest per annum on payments from the date they were paid until the date your complaint is settled.
You will also be released from the responsibility of being a guarantor and will be able to request the rectification of your credit file.
How to file a complaint
It is free to file a complaint if you believe you have been wrongly sold a guarantor loan or have been treated unfairly.
You don’t need to hire a claims management company, which charges high fees – up to 30% of your payment – for the service. On a payment of £1,000, this is worth £300 in fees.
It’s free to file a complaint with your lender and you don’t need any supporting evidence, just a clear description of why you think you were abused.
You will need to do this in writing by email or letter – you can find the address to send it to on the lender’s website.
You will need to include information such as the amount of the loan and the date it was taken out, and explain that this is an affordability complaint.
MoneySavingExpert and DebtCamel have template letters you can use – all you have to do is fill in your specific details.
If you don’t hear from the lender within eight weeks, you can forward your complaint to the Financial Ombudsman Service (FOS).
Alternatively, MoneySavingExpert and the claims site Resolver have a free tool you can use to build your case.
It will also remind you to report your case to the FOS after eight weeks.
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