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What has happened?

In June 2022, the FCA announced in a Final Notice that it had fined TFS Loans Ltd (a firm in administration) £811,900 in relation to deficient affordability checks on 3,150 guarantors in its consumer credit business. The FCA also imposed a requirement on TFS to pay redress to the guarantors that were harmed by the firm not conducting appropriate checks.

The FCA’s findings relate to customers who guaranteed loans taken with TFS Loans in the period between 02 November 2015 and 10 April 2018. The affected customers will be the subject of a review by TFS’ Joint Administrators in accordance with a redress programme, to be agreed with the FCA, and will be contacted by the Joint Administrators about redress and how to make a claim in the administration of TFS Loans.

What are the key points of the FCA’s Final Notice?

TFS offered, as its only business line, guarantor loans to customers who could not readily obtain other forms of credit; these loans required the customer to nominate a third party, often a family member or friend, to provide a guarantee of their loan repayments. The FCA found that TFS had failed to undertake adequate affordability checks on the guarantors, who were liable when borrowers were unable to pay their debts. As a consequence, the FCA required TFS to provide redress to guarantors, where needed, to repair their credit history where necessary, and release guarantors from liability under any continuing guarantees.

TFS’ failure to collect appropriate information on guarantors’ financial circumstances, applying what the FCA calls a “formulaic approach”, which meant that some guarantors were unable to afford the guarantees they entered into, risking significant personal financial repercussions and distress if those guarantees were called upon.

TFS also placed an additional financial burden on customers who were already in arrears by charging excessive late payment management fees, in violation of its own policies.

As a result of these failings, the FCA found that TFS breached FCA Principles 3 and 6 as it failed to treat customers fairly or take reasonable care to organise and control its affairs responsibly and effectively.

The FCA’s enforcement action against TFS is the latest FCA intervention to address issues in the consumer credit market, which can cause serious consequences for consumers who are financially vulnerable. The FCA has highlighted the credit market as an area of focus in view of the current cost of living crisis.

How can we help you?

If you’d like to know more about how we can help you with your guarantor lending arrangements, affordability checks or any other regulatory compliance issues, our specialist team is here to help.

Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.