Guarantor Loans Claims UK 2025: Compensation Rights & Irresponsible Lending Guide

What Are Guarantor Loans and How Do They Work?

Guarantor loans represent a specific category of high-cost credit where lenders require a third party—typically a family member or friend—to guarantee loan repayments if the primary borrower defaults or misses payments. These loans emerged to serve customers with poor credit histories, no credit records, or financial circumstances that prevented them from accessing mainstream personal loans from traditional banks and building societies.

The guarantor's agreement to cover missed payments reduces lender risk, allowing approval of loans for borrowers who would otherwise face rejection, though this risk transfer creates significant obligations and potential financial harm for guarantors who may not have fully understood their liability when agreeing to support borrower applications.

Standard Guarantor Loan Characteristics

Guarantor loans in the UK market typically feature loan amounts between £500 and £15,000, with repayment terms ranging from one to seven years depending on the borrowed sum and lender policies. Interest rates on guarantor loans significantly exceed standard personal loan rates, commonly ranging from 30% to 79.9% APR with representative rates around 39.9% to 49.9% APR reflecting the higher risk profile of borrowers requiring guarantor support.

This high-cost structure means borrowers often repay more than double the original borrowed amount over the loan term, with a £5,000 loan at 49.9% APR over 36 months costing approximately £8,783 total including interest charges.

Guarantor Eligibility Requirements

The guarantor typically must be aged 21 or over (some lenders accept 18+), have a good credit rating demonstrating responsible credit management, maintain a UK bank account, and in many cases must be a homeowner providing additional security through property equity that lenders could theoretically pursue if guarantors defaulted on their obligations.

Lenders contact guarantors only after borrowers miss payments and fail to respond to initial contact attempts, though the speed and circumstances of guarantor contact vary significantly between lenders and have been subject to regulatory scrutiny when lenders pursued guarantors too aggressively or without adequate borrower default procedures.

• Loan Amounts: Typically £500-£15,000 depending on lender and affordability assessment outcomes
• Interest Rates: 30%-79.9% APR, commonly 39.9%-49.9% representative APR
• Repayment Terms: 1-7 years (12-84 months) with fixed monthly instalments
• Guarantor Requirements: Age 21+, good credit rating, UK bank account, often homeowner status
• Target Market: Borrowers with poor credit, CCJs, defaults, or limited credit history
• Total Cost: Often 150%-200%+ of borrowed amount due to high interest over term

Guarantor Obligations and Liability

Guarantors assume full legal liability for the entire loan amount plus interest and charges if borrowers default, creating potential obligations worth thousands of pounds that can persist for years if borrowers experience ongoing financial difficulty. This liability remains enforceable even if the borrower enters bankruptcy, Individual Voluntary Arrangements (IVAs), or other insolvency proceedings that discharge their personal obligations, as the guarantee represents a separate legal commitment independent of the borrower's financial status.

Lenders can pursue guarantors through County Court proceedings, obtain County Court Judgments (CCJs), and potentially enforce against guarantor assets including property if guarantors fail to meet payment demands following borrower default.

Importance of Proper Affordability Assessment

The serious nature of guarantor obligations requires lenders to conduct independent affordability assessments ensuring guarantors can realistically meet potential payment obligations if called upon, though systematic failures in these assessments created the mass compensation liabilities that destroyed major guarantor loan providers throughout 2020-2025.

Guarantors who weren't properly assessed for affordability, didn't receive adequate explanation of their obligations, or weren't independently verified as capable of meeting payments have strong grounds for compensation claims that can result in guarantee discharge, payment refunds, and credit file corrections even where borrowers genuinely defaulted on their obligations.

The Guarantor Loans Market Collapse 2020-2025

The UK guarantor loans market experienced catastrophic contraction between 2020 and 2025 as systematic irresponsible lending practices led to mass complaints, regulatory enforcement actions, and ultimately insolvency for the sector's largest providers.

What began as a growing market serving over 150,000 UK customers in 2018 with major lenders including Amigo Loans, TFS Loans, George Banco, Buddy Loans, and Trust Two collapsed into a handful of operational lenders facing reduced demand, heightened regulatory scrutiny, and mounting compensation liabilities from historical lending failures that demonstrated widespread affordability assessment inadequacies across the entire sector rather than isolated company-specific problems.

Amigo Loans Collapse

Amigo Loans, the UK's largest guarantor lender with operations from 2005 to 2020, received 14,017 complaints in 2020 compared to just 583 in 2019—a staggering 2,304% increase—as customers became increasingly aware of their rights to challenge unaffordable lending.

The FCA imposed lending restrictions in May 2020, effectively banning new loan origination while requiring Amigo to address mounting complaint backlogs and implement remediation programs. Unable to generate revenue from new lending while facing over 210,000 compensation claims totaling £345 million plus £319 million in processing costs, Amigo proposed a Scheme of Arrangement that received Court approval in May 2022, ultimately paying customers just 18.51 pence per pound of calculated compensation before the company liquidated in September 2025.

TFS Loans Administration

TFS Loans entered administration in February 2022 following similar patterns of mass complaints and regulatory enforcement, with the FCA fining the company £811,900 in June 2022 for deficient affordability checks on 3,150 guarantors between November 2015 and April 2018.

The FCA found TFS failed to collect appropriate information on guarantors' financial circumstances including essential expenses like food, clothing, energy, childcare, and medical costs, instead relying on flawed formulaic approaches that assumed household expenditures without proper verification.

Wider Market Failures

Buddy Loans similarly entered administration in 2021, while other major players including George Banco, Trust Two, and UK Credit ceased new lending operations, leaving the guarantor loan market as a shadow of its former scale with limited active providers serving a dramatically reduced customer base.

Complaint Volume Growth and Customer Awareness

StepChange Debt Charity data demonstrates the escalating awareness of guarantor loan problems, with 35 times more people seeking help with guarantor debt in 2018 compared to 2012, and clients with guarantor debt increasing at an average rate of 106% annually over that six-year period.

The proportion of total debt comprised by guarantor loans increased from 19% in 2012 to 28% in 2018 among debt charity clients, suggesting growing reliance on this high-cost credit form combined with increasing difficulty managing repayments. This explosion in problem debt preceded the mass complaints that ultimately destroyed major lenders, as customers struggling with unaffordable repayments gradually discovered their rights to challenge original lending decisions through Financial Ombudsman Service procedures or direct lender complaints.

Financial Ombudsman Service Uphold Rates

The Financial Ombudsman Service historically upheld guarantor loan complaints at a 90% rate—the highest uphold rate across all financial product categories—demonstrating systematic affordability assessment failures rather than isolated incidents of poor lending judgment.

This extraordinarily high uphold rate indicated that guarantor lenders routinely approved loans that shouldn't have been granted based on borrower and guarantor financial circumstances, with FOS consistently finding lenders failed to conduct reasonable and proportionate affordability checks required under FCA Consumer Credit Sourcebook regulations governing responsible lending practices in the high-cost credit sector.

FCA Regulations: Your Legal Protections Under CONC 5.2A

The Financial Conduct Authority's Consumer Credit Sourcebook (CONC) establishes comprehensive requirements for guarantor loan lenders to conduct affordability assessments protecting both borrowers and guarantors from unaffordable lending. CONC 5.2A specifically addresses guarantor lending, requiring firms to undertake reasonable assessments of potential for guarantor commitments to have significant adverse impacts on guarantors' financial situations before entering credit agreements or significantly increasing credit provided.

These regulations create the legal foundation for guarantor loans claims UK 2025, as failures to comply with CONC 5.2A requirements constitute regulatory breaches that Financial Ombudsman Service can address through complaint adjudication requiring compensation, debt write-offs, and guarantor release where irresponsible lending occurred.

CONC 5.2A.32R - Mandatory Guarantor Affordability Assessment

CONC 5.2A.32R establishes the core requirement that firms must undertake reasonable assessments of guarantor affordability before approving guarantor loans, focusing specifically on whether guarantor commitments could have significant adverse impacts on guarantors' financial situations rather than simply whether guarantors possess assets or income that could theoretically cover loan payments.

This assessment requirement applies before entering regulated credit agreements and before significantly increasing credit amounts or credit limits, ensuring lenders reassess affordability when providing loan top-ups or additional lending to existing customers rather than assuming previous affordability continues unchanged despite potentially deteriorating financial circumstances.

Information Requirements for Affordability Assessments

The regulation requires lenders to obtain information from guarantors themselves or from borrowers on guarantors' behalf, supplemented where necessary by credit reference agency data providing objective evidence of guarantors' credit commitments, payment histories, and overall credit profiles.

This information must enable firms to carry out reasonable assessments, meaning superficial checks or formulaic approaches that ignore individual circumstances fail to satisfy regulatory requirements regardless of whether those approaches successfully identify most unsuitable guarantors. The FCA explicitly excluded legal mortgages and pledges from guarantee definitions for these rules, focusing requirements on personal guarantees where guarantors commit to repay consumer credit obligations through their personal finances rather than providing security interests over specific assets.

FG17/1 Finalised Guidance on Default Notices

The FCA's FG17/1 guidance published in January 2017 clarifies how Consumer Credit Act 1974 default notice requirements apply to guarantor lending, particularly addressing when lenders must issue default notices before taking payments from guarantors or enforcing guarantee obligations.

The guidance establishes that lenders may request payments from guarantors without issuing default notices provided these requests don't constitute "enforcement" involving coercion or demands, though lenders must provide clear communications distinguishing requests from demands and allowing guarantors reasonable opportunity to respond before any payment collection through Continuous Payment Authorities or Direct Debit mandates previously provided by guarantors.

Notice Requirements for Payment Collection

FG17/1 requires at least 5 working days advance notice before lenders use CPAs or Direct Debit mandates to collect guarantor payments, ensuring guarantors can rescind these authorities if they wish before funds are taken. Communications before payment collection must clearly explain that borrowers have breached agreement terms, describe the breach nature, specify overdue sums amounts, and indicate likely payment timing, providing transparency that allows guarantors to understand their obligations and make informed decisions about whether to pay voluntarily, arrange payment plans, challenge lending affordability, or rescind payment authorities preventing automatic collection.

Only when lenders seek to "enforce" payment through coercive measures do default notice requirements apply, with enforcement defined as actions requiring or otherwise coercing guarantors into payment rather than simply requesting voluntary payment or using previously-provided payment authorities with adequate advance notice following FCA official guidance.

Common Grounds for Guarantor Loans Claims and Compensation

Guarantor loans claims UK 2025 typically succeed based on inadequate affordability assessments demonstrating lenders failed to conduct reasonable and proportionate checks on borrowers' or guarantors' financial circumstances before approving loans.

The Financial Ombudsman Service examines whether lenders completed checks that should have revealed lending was unaffordable, assessing whether fair lending decisions were made based on available information, and determining what reasonable checks would likely have shown if lenders had conducted proper affordability assessments rather than relying on superficial verification or automated decisioning systems that ignored obvious financial stress indicators requiring detailed investigation or loan decline recommendations.

Borrower Affordability Assessment Failures

Lenders routinely failed to properly verify borrower income, assess expenditure comprehensively, or consider existing credit commitments when approving guarantor loans, instead relying on stated income figures without payslip verification, accepting generic expenditure estimates ignoring individual circumstances, and approving loans despite credit files showing multiple active payday loans, consistent overdraft usage, recent defaults, CCJs, or other clear indicators that borrowers already struggled with existing debt obligations before taking additional high-cost credit.

These superficial assessments meant lenders approved loans for customers who couldn't sustainably afford repayments alongside existing financial commitments, creating foreseeable default situations requiring guarantor intervention that could have been prevented through proper affordability verification.

Loan Top-Up Assessment Failures

Loan top-ups represent particularly egregious failures where lenders approved additional borrowing without reassessing affordability considering changed circumstances since original loans were issued, often approving top-ups shortly after previous loans despite no evidence of income increases or expenditure reductions that would enable customers to service larger debt burdens.

Evidence from upheld complaints shows lenders approving multiple top-ups over short periods, each increasing customer indebtedness without fresh affordability reviews, suggesting automated approval systems or sales targets driving inappropriate lending rather than genuine assessments of whether customers could sustainably manage increased repayment obligations alongside their ongoing financial commitments and basic living expenses.

• Multiple Active Payday Loans: Lenders approved guarantor loans despite obvious financial stress from existing high-cost credit
• Persistent Overdraft Usage: Failed to investigate why borrowers consistently maxed overdrafts indicating income shortfalls
• Recent CCJs/Defaults: Ignored credit file evidence of payment difficulties requiring enhanced affordability scrutiny
• Inadequate Income Verification: Relied on stated income without payslip verification or employment confirmation
• Generic Expenditure Estimates: Used formulaic expenditure assumptions ignoring individual circumstances and dependents
• Loan Top-Up Failures: Approved additional borrowing without reassessing affordability or considering changed circumstances

Guarantor Assessment Deficiencies

Guarantor affordability assessments proved even more deficient than borrower checks, with lenders frequently conducting minimal verification of guarantors' ability to meet potential payment obligations if borrowers defaulted.

The TFS Loans FCA enforcement action specifically identified failures to collect sufficient information on guarantors' financial circumstances including essential expenses like food, clothing, energy, childcare, and medical costs, instead relying on flawed formulaic approaches that assumed standard household expenditures without verifying actual guarantor commitments or individual circumstances affecting their capacity to service additional debt obligations on top of their existing financial responsibilities.

Homeowner Status Misuse

Many lenders treated homeowner status as sufficient evidence of guarantor ability to pay, assuming property equity meant guarantors could raise funds if needed without properly assessing whether guarantors could sustainably meet monthly payment obligations from income and expenditure or whether requiring guarantors to access property equity through remortgaging or secured lending would itself constitute financial harm.

Lenders also failed to consider financial links between borrowers and guarantors, such as shared household expenses, joint tenancies where rent burden would fall on guarantors if borrowers defaulted, or other interdependencies meaning guarantor financial positions would deteriorate simultaneously with borrower difficulties rather than guarantors representing independent financial resources capable of absorbing borrower default without significant adverse impact on their own financial stability.

How to Complain About Irresponsible Guarantor Lending

Guarantor loans claims UK 2025 begin with direct complaints to lenders explaining why you believe lending was unaffordable based on your financial circumstances when loans were approved, providing evidence supporting your position, and requesting compensation including interest refunds, debt write-offs, guarantor release, and credit file corrections.

Lenders must investigate complaints fairly, respond within eight weeks with either acceptance and compensation offers or rejection explaining their reasoning, and provide information about escalating to the Financial Ombudsman Service if you disagree with outcomes or if lenders fail to respond within required timescales following FOS complaint procedures.

Initial Direct Lender Complaint Process

Your complaint should clearly state you're challenging lending affordability, identify which loans you're complaining about (include loan dates, amounts, and references), explain your financial circumstances when loans were approved, and describe why you believe lenders should have known lending was unaffordable.

Include evidence such as bank statements from the loan approval period showing income, expenditure, and existing credit commitments; credit reports from around the lending dates showing defaults, CCJs, or existing debt levels; correspondence with lenders demonstrating what information they obtained during application processes; and any other documentation supporting your claim that reasonable affordability checks would have revealed lending was unsustainable considering your circumstances.

Complaint Focus and Content

Focus your complaint on what lenders knew or should have known at the time of lending rather than subsequent events that may have affected your ability to repay, as Financial Ombudsman Service assesses whether original lending decisions were reasonable based on information available when loans were approved.

Explain specific affordability assessment failures such as inadequate income verification, failure to request or review bank statements, generic expenditure assumptions ignoring your actual commitments, or approval despite obvious financial stress indicators in credit files. If you're a guarantor complaining, emphasize if lenders failed to independently assess your affordability, didn't explain guarantee obligations adequately, or didn't consider financial links between you and borrowers that increased likelihood both parties would experience financial difficulty simultaneously.

Financial Ombudsman Service Escalation

If lenders reject your complaint or fail to respond within eight weeks, you can escalate to the Financial Ombudsman Service free of charge for individual consumers, bypassing professional representative charges introduced in April 2025 that apply only to representatives bringing more than ten complaints annually.

FOS escalation requires submitting complaint forms available through the FOS website, providing copies of your direct lender complaint and the lender's response (if any), and supplying the same evidence you provided to lenders plus any additional documentation supporting your case. FOS typically involves initial assessment by an adjudicator who reviews case merits and may facilitate settlement negotiations with lenders, followed if necessary by formal ombudsman determination providing binding decisions on lenders subject to FOS compensation award limits.

FOS Assessment Criteria and Remedies

FOS considers whether lenders completed reasonable and proportionate affordability checks, whether fair lending decisions were made based on available information, what reasonable checks would likely have shown, and whether lenders acted unfairly or unreasonably in other ways affecting your treatment.

Ombudsman decisions can require lenders to refund all interest and charges, write off outstanding debt balances above original borrowed amounts, release guarantors from ongoing liability, correct credit files removing adverse information, and pay 8% statutory interest on refunded amounts compensating for time value of money. The FOS upheld rate for guarantor loan complaints historically reached 90%—the highest across all financial product categories—though current uphold rates may differ given market changes and complaint volumes affecting case handling patterns and assessment approaches under 2025 operational procedures.

Active Guarantor Loan Lenders and Claim Opportunities

While major guarantor loan providers including Amigo Loans, TFS Loans, and Buddy Loans have ceased operations or entered administration, several lenders remain operational or subject to complaint procedures offering prospects for guarantor loans claims UK 2025 through direct complaints, Financial Ombudsman Service escalation, or administrator-managed claim processes.

Understanding which lenders accept complaints and what procedures apply proves essential for pursuing compensation, as approaches differ significantly between operational lenders subject to normal FOS procedures, companies in administration where administrators control claim handling, and liquidated companies where only unclaimed funds court applications remain possible as demonstrated by the Amigo Loans liquidation requiring High Court applications for missed payments.

George Banco and Operational Lenders

George Banco, while having ceased new lending operations, continues accepting complaints about historical loans and remains subject to Financial Ombudsman Service jurisdiction for customer disputes regarding affordability assessments, guarantee enforceability, or other lending conduct issues.

Customers with George Banco guarantor loans can submit direct complaints following standard procedures, escalate to FOS if complaints are rejected or unanswered within eight weeks, and potentially receive full 100% compensation awards rather than reduced percentage payments typical of insolvency schemes. Acting promptly while George Banco remains capable of paying compensation provides optimal recovery prospects, as delayed complaints risk the company following Amigo and TFS into administration or schemes of arrangement that dramatically reduce compensation percentages to pennies per pound as insufficient funds are divided among excessive claimant numbers.

Everyday Loans and Bamboo Loans

Everyday Loans and Bamboo Loans maintain limited guarantor loan operations under heightened FCA regulatory oversight following the sector-wide collapse that destroyed larger competitors. These lenders accept complaints about both current and historical lending, remain subject to normal FOS complaint procedures without the complications of administration or insolvency, and face regulatory pressure to handle complaints fairly given intense scrutiny of guarantor lending practices post-2020.

Customers experiencing financial difficulty with these lenders or believing original lending was unaffordable should submit complaints promptly, as operational lenders with ongoing business activities typically settle appropriate complaints more readily than companies in administration focused primarily on asset realization and creditor distributions rather than customer service or regulatory relationship management.

TFS Loans and Administrator Claims

TFS Loans administration since February 2022 means complaints must be directed to administrators Opus Restructuring LLP rather than TFS directly, with administrators assessing claims against available company assets and determining appropriate settlements or rejections based on affordability evidence and regulatory compliance reviews.

The FCA's £811,900 fine against TFS for deficient guarantor affordability checks on 3,150 guarantors establishes clear grounds for complaints, though the fine is only payable after full customer redress ensuring fine payments don't reduce compensation availability. Administrators handle claim assessment and distribution, though recovery prospects remain uncertain depending on TFS asset values, claim volumes, and administrators' discretion regarding appropriate compensation levels given the company's insolvent status limiting available funds for customer payments.

Recovery Prospects for Administrator Claims

Customers with upheld TFS claims face potential delays and reduced recovery compared to complaints against solvent lenders, as administrators must balance competing creditor interests and may propose reduced settlements reflecting TFS's limited asset base rather than full compensation calculations typical of Financial Ombudsman Service awards.

However, submitting claims to administrators remains worthwhile even with uncertain recovery prospects, as failing to submit claims guarantees zero recovery while successful claims provide at least some compensation possibility if sufficient TFS assets exist after secured creditor payments and administration costs. The FCA enforcement requiring TFS to redress harmed guarantors, repair credit histories where necessary, and release guarantors from continuing liabilities provides regulatory backing for claim validity even in administration context, though enforcement of these requirements depends on administrator cooperation and available asset values.

Compensation Calculation Framework and Award Amounts

Guarantor loans claims UK 2025 compensation follows established frameworks where lenders must refund all interest and charges paid if complaints are upheld, potentially resulting in substantial awards depending on loan amounts, interest rates, and repayment duration.

The Financial Ombudsman Service approach recognizes borrowers received loan proceeds and should repay borrowed capital, but removes interest and charges that shouldn't apply to loans that were unaffordable when approved. This means outstanding loan balances reduce to original borrowed amounts minus payments already made, with borrowers either receiving refunds if they've overpaid or owing reduced balances representing only the capital borrowed without interest or charge components.

Standard Compensation Components

Compensation for upheld guarantor loan complaints includes several distinct elements addressing different aspects of harm caused by unaffordable lending. Interest and charge refunds represent the primary component, returning all interest payments and charges borrowers or guarantors paid throughout the loan term as these amounts relate to loans that shouldn't have been approved.

The FCA requires lenders to add 8% statutory interest per annum to refunded amounts, compensating customers for time value of money and opportunity costs of funds paid to lenders for unaffordable loans. This statutory interest accrues from the dates payments were made until refund dates, meaning longer-standing loans generate higher statutory interest amounts reflecting extended periods customers were deprived of funds that should have been refunded earlier.

Balance Adjustments and Guarantor Release

Outstanding balance adjustments prove crucial for customers still repaying guarantor loans when complaints are upheld, as lenders must recalculate balances removing all interest and charges from original loan amounts and applying payments made to date against the remaining capital balance.

This often results in significant balance reductions or complete debt elimination if customers have repaid amounts exceeding original borrowed sums, with customers only owing remaining capital balances if their total payments haven't yet reached the original loan amounts without interest or charges. Guarantor release represents a critical remedy where guarantors complaining about inadequate affordability assessments receive discharge from ongoing guarantee obligations, meaning lenders cannot pursue guarantors for future payments even if borrowers default, though this remedy applies only prospectively from complaint upheld dates rather than retrospectively refunding guarantor payments already made which are addressed through separate interest refund calculations.

• Interest and Charges Refund: All interest and charges paid throughout loan term refunded to borrowers/guarantors
• Statutory Interest: 8% per annum added to refunded amounts from payment dates to refund dates
• Balance Reduction: Outstanding balances recalculated to reflect only borrowed capital minus payments made
• Guarantor Release: Guarantors discharged from ongoing liability preventing future payment demands
• Credit File Correction: All adverse information related to guarantor loans removed from credit reports
• Consequential Loss: Additional damages for specific harms like account fees, missed opportunities, or distress in appropriate cases

Example Compensation Calculations

A customer who borrowed £5,000 through a guarantor loan at 49.9% APR over 36 months would have contractual repayment obligations totaling approximately £8,783 including £3,783 in interest and charges. If this customer made all payments before complaining and the Financial Ombudsman Service upholds the complaint finding lending was unaffordable, the customer would receive refund of the £3,783 interest and charges plus 8% statutory interest calculated from each payment date to the refund date.

Assuming an average 18-month period from mid-point of repayments to refund, statutory interest would approximate £454 (8% of £3,783 for 1.5 years), resulting in total compensation around £4,237 before any tax treatment of the statutory interest component.

Ongoing Loan Compensation Examples

For a customer still repaying when their complaint is upheld, calculations differ as the focus shifts to balance reduction rather than refunds. If a customer borrowed £5,000 and has made payments totaling £6,000 over 24 months of a 36-month term with £2,783 remaining balance at complaint upheld date, the lender must recalculate the balance removing all interest and charges.

The original borrowed amount of £5,000 minus £6,000 in payments made shows the customer has overpaid by £1,000, meaning the lender must refund £1,000 plus 8% statutory interest from payment dates, and the £2,783 remaining balance is completely eliminated with no further payments required. This demonstrates how guarantor loan compensation significantly impacts both completed and ongoing loans, providing substantial financial relief for customers who struggled with unaffordable high-cost credit.