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.

TFS offered guarantor loans to customers who typically struggled to 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 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 has required TFS to provide redress to guarantors, where needed, to repair their credit history, where necessary and to release guarantors from liability under any continuing guarantees.

TFS’ failure to collect appropriate information on guarantors’ financial circumstances meant some guarantors were unable to afford the guarantees they entered into, risking significant personal financial repercussions and distress, if those guarantees were called upon. This happened in some cases.

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 failed to treat customers fairly or to take reasonable care to organise and control its affairs responsibly and effectively.

The FCA’s enforcement action against TFS is the latest intervention by the UK’s financial regulator 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 given the on-going increase in the cost of living.

Mark Steward, Executive Director of Enforcement and Market Oversight, said:

‘Friends and family members who agree to act as a guarantor for a loved one should feel confident that the lender will treat them fairly. The FCA’s affordability rules protects both consumer credit borrowers and guarantors from unaffordable risks. These requirements are high priority areas for the FCA especially as families face overall increases to their cost of living.’

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