UK Credit – Guarantor loan problems

[Gensk121]

After having issues with gambling and payday loans, my credit score was ruined and my partner agreed to help me with a guarantor loan to consolidate some of the debt, a terrible idea as we've found out.

 

At the time I had over £10,000 of HTSTC loans outstanding and said I would consolidate some of these with the loan.

 

UK Credit lent £7,500 to me, with repayments of £281.

I paid around £6,000 off the HTSTC loans with the money, the rest I owed to my partner.

Straight away I struggled, took out more debt to help with payments and then in April 2017 stopped due to lack of finances.

 

In June I filed a complaint with UK Credit claiming irresponsible lending.

 

Soon after the Ombudsman wrote to myself saying they were looking into the case and asking UK Credit for information, UK Credit wrote to the guarantor with a Letter Before Action notice, stating the remaining £7,543 had to paid in full, otherwise court action would follow.

 

My guarantor is often pestered saying court action is soon approaching if nothing is done.

 

Too get them off my back while the Ombudsman looks into this, last month I offered £200 a month which they rejected and stated that they wanted the full £280 a month repayment upheld. As they didn't agree with our expenditure forms. I currently have £800 a month going out in debt repayments.

 

 

I would like some advice on how to get them off guarantor's back.

How likely is court action?

What is the best course of action until the Ombudsman takes further action?

Edited October 17, 2017 by Gensk121

[Gensk121]

I took out a loan with UK Credit in January 2016. At the time I had numerous outstanding PDLs and a serious gambling addiction.

 

The loan was for £7,500 over 4 years with a repayment of £281.50 a month and my long-term partner would be the guarantor.

 

My monthly wage was around £1270 after tax.

 

Monthly outgoings after taking the loan

Mortgage, utility bills £450 pm

UK Credit - £281.50 pm

AVANT Credit - £175 pm

Santander Credit card £1,878 balance, Minimum payment of £35 pm

Home Retail Group Store card £337 balance, Mimimum payment around £30 pm

Marbles Credit card £897 balance, Minimum payment around £43 pm

EE monthly phone bill £40 pm

 

= £1054

 

Then you have transport, shopping, and other forms of personal expenditure which from looking at bank statements shows was more than the remaining £220.

 

What I used the loan to clear.

£969 Payday UK

£2,556 118118

£260 EE

£274 Mr Lender

£903 Myjar

£977 Sunny Loans

£550 Vanquis

 

The remainder was used to pay my partner for money owed to her.

 

I managed to make repayments for about a year but this was threw further payday loans and gambling. When all this came to a hault the payments stopped and I have only been able to renew these from November 2017. When I approached StepChange, UK credit were not helpful in the slightest they just pushed the debt on to the guarantor who was also struggling due to my financial problems.

 

I said the the loan was unaffordable, UK Credit rejected my complaint straight away so I went to the FoS. An adjudicator has looked at the case and has said that in their opinion UK Credit are not in the wrong. So i'm now in the position of going for a final decision and wanted to know if anyone had any advice if i'm in the wrong/right and what could help sway the decision in my favour.

Edited January 10, 2018 by Gensk121

[fkofilee]

Hi Gensk

 

What did you do about the other loans? Using further loans to pay off loans is not on and against what the FCA sets out in their Handbook.

I think its worth reading the FCA CONC Sourcebook

 

*COUGH* https://www.consumeractiongroup.co.uk/forum/attachment.php?attachmentid=69475 *COUGH*

 

Guarantor loans should still be subject to affordability checks.

[Gensk121]

Hi fkofilee,

 

Thanks for looking.

 

I did tell UK Credit before I took out the loan the debts I had and what I planned to clear.

 

Here is the adjudicator's opinion. I rejected it and gave some more points to why it was unaffordable + the fact he missed 3 credit cards, which he has gone against. I have now got to go to the Ombudsman for a final decision, but I'm looking for more evidence to take with me as i'm worried they'll disagree like the adjudicator.

 

You took out the loan on 29 January 2016. The capital was for £7,500 and the interest was £6,021. The length of the agreement was 48 months and the monthly repayments were £281.50. The loan was to be used to consolidate some outstanding debts.

 

Prior to lending, UK Credit has to carry out an affordability check to ensure the customer has the ability to make the repayments over the life of the agreement.

 

The Financial Conduct Authority (FCA) has produced the Consumer Credit sourcebook (CONC) which explains the affordability check should be proportionate to a number of factors. The guidance says checks should be proportionate to criteria such as the cost of the credit, the customer's existing financial commitments, what the loan is to be used for, and any future financial commitments. The business can only take into account information it is aware of at the time.

 

There are no set checks a business has to carry out, so there’s no requirement for a business to check bank statements. It could, for example, verify your income, ask for evidence of your expenditure, carry out a credit check and/or ask for information from the customer. We have to look at whether the checks carried out were proportionate in your situation.

affordability checks

UK Credit has provided information to show it verified your income, asked you to confirm your monthly expenditure and carried out a credit check to see your monthly credit outgoings.

 

It confirmed your income was around £1,278 per month. According to your bank statements, this is an accurate reflection.

 

You told UK Credit your monthly expenditure was:

• £450 for mortgage and bills.
  
• £93.45 for credit repayments.
  
• £314.32 for other repayments.
  

 

To some degree, this is an accurate reflection. From your bank statements, I can see a regular monthly payment of £450. At the time of the lending, your credit repayments were more than what you stated. However, the loan would’ve worked to reduce some of those outgoings so you would’ve only had an additional £175 to pay toward Avant Credit. Your bank statements show there was some other essential expenditure, such as food and clothing, but it’s not as much as an additional £314.

 

Based on the information you provided to UK Credit, I don’t think it would’ve been proportionate for it to check your bank statements. The repayments were affordable and the amounts you provided weren’t unreasonable.

 

The information from your credit file doesn’t necessarily indicate you had a problem with gambling, so I wouldn’t have expected UK Credit to make that connection. I agree your credit history does show a reliance on short term credit. However, the purpose of a consolidation loan would be to break the reliance on short term credit.

 

fair and reasonable

From the information I’ve received, I can see most of the loan went towards paying otherlenders. You received £6,100 into your account on 1 February 2016 and then I’ve seen:

• £969.36 was paid to Payday UK Limited, which would’ve been £274 a month for three more months. It also put an end to the chain of loans you had taken out.
  
• £2,556.76 was paid to Madison UK Limited (known as 118 118 Money), which would’ve been £190 a month for around 20 months.
  
• £260 was paid to EE to reduce the outstanding debt.
  
• £274 to Mr Lender, which would’ve needed to be repaid the following month.
  
• £903.08 to Myjar which would’ve needed to repaid the following month. This also put an end to the chain of loans you’d taken out.
  
• £977.74 to Sunny loans which would’ve been around £100-£120 a month. This would’ve also put an end to the chain of loans.
  

 

You’ve said you made a payment to Avant Limited as well, but your credit file doesn’t show any payment was made to that account.

 

The fact that most of the loan was used to reduce your monthly outgoings meant the consolidation loan worked as it should’ve done. In the short term, it reduced the amount you would’ve had to pay in the following three months. In the long term, it also meant you wouldn’t need to keep taking short term credit to repay previous short term loans, which would’ve given you a more stable financial position.

 

Although this didn’t solve all your immediate financial issues, it did help to reduce your short term monthly outgoings. Your bank statements show, despite paying off some of the loans, within a few months, your non-essential expenditure increased and so you started borrowing again. It appears subsequent borrowing was used to fund non-essential expenditure rather than the loan repayments. Although, I do appreciate, with the amount of money coming in and out, it’d be difficult to determine exactly what the borrowing was used for. It’s the customer’s responsibility to ensure they have enough funds to meet their financial commitments and if money is spent on other things, which means they can’t meet the repayment, it’d be unfair to say this business is at fault.

 

Overall, I don’t think it’d be fair to say UK Credit has acted unreasonably because, at the time, it did help improve your financial situation. Also, at the point the loan was approved, the repayments would’ve been affordable. As the loan is a guarantor loan, there has to be a guarantor. I appreciate your partner wasn’t aware of the full extent of your financial situation. However, this isn’t the fault of the business and, as the guarantor agreed to be a part of this, I wouldn’t be able to recommend that they be removed.

Edited January 10, 2018 by Gensk121

[Gensk121]

Sorry misunderstood the question.

 

I carried on taking loans out until around March 2017, and then decided I needed to do something about it for good.

 

I got help with the gambling and put complaints in against all the lenders. I've had good success claiming against other Payday loans. Most have either been refunded or reduced if they are still outstanding. It's just this guarantor loan that I've had trouble with.

Edited January 11, 2018 by Gensk121

[Gensk121]

Thank you for the information I've read the parts of the FCA handbook you mentioned. I'm trying to put some additional information together to build the strongest case.

 

Do the refinancing rules only apply to high-cost short-term credit loans?

and is a guarantor loan classed at HCSTC?

 

Thanks again

[fkofilee]

A Guarantor loan is not classed as HCSTC by the APRs are Eye Watering for these loans... So can be conidered as High Cost Variants / Installment Loans - This is what they are.

If you are getting into more debt to pay off existing debt that this would be considered irresponsible on the lending side.

 

I think that while the FOS have been correct in their guess that you essentially "Consolidated" to one monthly payment, it is unfair to have done this through a Guarantor loan.

[Gensk121]

Just an update,

 

I went for a final decision on with the FOS, and it came back favoring UK Credit.

 

UK Credit are now calling the guarantor for additional payments due to the 'state of the account'.

Even though I have started paying the full £281.50 a month repayment again since November, so that it wouldn't go to court. They agreed this was satisfactory back then.

UK Credit are now calling the guarantor for additional payments due to the 'state of the account'.

 

 

For anyone interested in the final decision statement:

I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint.

A lender is required to make proportionate checks about the affordability of a loan before lending to a customer. What is proportionate for each loan will depend on the circumstances of that loan. UK credit says Mr G advised it that his monthly income averaged about £1,278 and that it verified that amount by an electronic check of his current account. It says that it assessed his outgoings and that Mr G confirmed his average monthly expenditure. And it says that it calculated his average monthly surplus (after making the loan repayment) as £138.73.

 

Mr G had said that the purpose of the loan was to consolidate his short term loans and UK Credit asked him for details of those loans. Mr G provided it with information about some of his loans – but despite being asked whether he had other loans he didn’t tell it about all of his loans. I consider that the information that it gathered about Mr G was proportionate in the circumstances. I’m not persuaded that there was any need for it to have obtained more information about Mr G’s financial circumstances. And I don’t consider that there was any need for it have obtained a credit report about Mr G.

 

On the basis of the information that it had gathered, it made an affordability assessment which showed that Mr G had enough disposable income to be able to afford the loan. That assessment didn’t include Mr G’s partner’s income. The affordability assessment didn’t include bthe repayments that Mr G was making on all of his loans because he hadn’t provided thatb information to UK Credit. And Mr G’s partner guaranteed that he would make the loan repayments. So I’m not persuaded that it was irresponsible for UK Credit to have made the loan to Mr G in these circumstances or that it has acted incorrectly. And I find that it wouldn’t be fair or reasonable for me to require UK Credit to cancel the loan, pay any compensation to Mr G, release his partner from the guarantee or to take any other action in response to his complaint.

 

Mr G’s evidence shows that he’s now suffering financial difficulties. UK Credit must act positively and sympathetically in response to any financial difficulties that he’s experiencing. And I would expect it to try to agree a repayment arrangement with Mr G for the outstanding balance of the loan, which takes account of his income and expenditure.

 

my final decision

For these reasons, my decision is that I don’t uphold Mr G’s complaint.

Edited March 20, 2018 by Gensk121

[fkofilee]

Er simply put no... You are servicing the debt at this time in line with the original T&Cs (Although it may be late payments)

They are chancing it here... So no...IF they take court action while you are making those payments - Judge will ask why they are doing it.

 

How many payments are you in arrears?

[Gensk121]

I missed 7 payments from Apr - Oct 17. £281.50 each - £1,970.50

 

They demanded the full sum of £7,771. be paid in October and I said I could afford to start repaying the £281.50 from November.

So they took that as a last chance to stop it going to court.

 

Then this month the guarantor has been asked to pay more.

Edited March 20, 2018 by Gensk121

[stuckinarut11]

Maybe the guarentor needs to raise their own complaint

 

Just a suggestion.