Am I Owed a Refund on a Guarantor Loan?
Guarantor loans were sold as a fix for people with thin or poor credit, with a friend or family member backing the debt. But the lender still had to check the loan was affordable for you, the borrower, not just rely on the guarantor as a safety net. If they did not, you may be owed a refund of the interest and fees you paid. Guarantors have rights too: if the loan should never have been given, the guarantee can be wiped out and any payments the guarantor made handed back.
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Your rights
Under FCA CONC 5, the lender had to assess whether you, the borrower, could afford the repayments from your own income, with the guarantor as backup rather than the reason to lend. Since November 2015, FCA rules also required lenders to assess whether a prospective guarantor could afford the repayments if required to make them. If the borrower's loan was unaffordable from the start, the usual remedy for an upheld complaint is a refund of all interest, fees, and charges paid, plus interest. If the loan has an outstanding balance, the lender will typically remove interest and charges, recalculate the balance, and refund any resulting overpayment with interest. Where a complaint is upheld and the guarantor has been making payments, the guarantee is removed and the guarantor gets their money back, plus interest. The Financial Ombudsman Service (FOS) aims to put you back in the position you would have been in if the problem had not happened, and may also award compensation for distress or inconvenience. If the lender refuses your complaint, or does not give a final response within 8 weeks, you can refer it to the FOS for free. You generally have six months from the date of the lender's final response to refer your complaint to the FOS, so check the deadline stated in their letter.
Step by step
- 1Decide which hat you are wearing: the borrower (reclaiming interest and fees) or the guarantor (getting released and refunded). Both can complain, sometimes about the same loan.
- 2Gather your paperwork: the loan agreement, statement of payments, and anything showing the lender's affordability checks. Send a free Data Subject Access Request if the lender will not hand it over.
- 3Write to the lender. As the borrower, argue the loan was unaffordable under CONC 5 and ask for interest and fees back plus interest. As the guarantor, argue the checks were inadequate and ask to be released and refunded any payments you made, plus interest.
- 4If you get a rejection, or no final response within 8 weeks, refer it to the Financial Ombudsman Service through their free online form. You generally have six months from the date of the lender's final response to do this, so check the deadline in their letter.
What they'll say, and your comeback
“The whole point of a guarantor is to cover the risk, so affordability did not matter.”
Comeback, Wrong. CONC 5 still required you to check the loan was affordable for me as the borrower. The guarantor was meant to be a backstop, not a substitute for assessing whether I could repay. Since November 2015, you also had to check if I, as the guarantor, could afford the repayments.
“The guarantor signed knowing the risks, so they cannot complain.”
Comeback, A signature is not the test. The lender had to make sure the guarantor genuinely understood the commitment and that the underlying loan was affordable. If the loan was mis-sold, the guarantee falls with it. The FOS can release an unfairly accepted guarantor from their guarantee.
“You are still making payments, so there is nothing to refund yet.”
Comeback, If the loan was unaffordable from the outset, every payment of interest and fees is reclaimable, and future interest should be removed too. If the loan has an outstanding balance, the FOS can direct you to remove interest and charges, recalculate the balance, and refund any resulting overpayment.
What actually happens
Guarantor loan complaints have historically seen high uphold rates at the Financial Ombudsman Service, making them well worth pursuing. Many people receive significant refunds of interest and charges if the lender failed to properly assess affordability. The first step is always to complain directly to the lender. While some lenders may settle at this stage, many complaints proceed to the FOS, especially if the lender rejects the claim or fails to respond within 8 weeks. The FOS process can take several months, but if successful, it often results in the full refund of interest and fees, plus interest, and the removal of the guarantee for guarantors. For loans with an outstanding balance, the FOS will typically order a recalculation, significantly reducing the debt. The Amigo situation is an exception, requiring court action for some claimants who missed their deadline.
FAQ
Can both the borrower and the guarantor complain?
Yes. The borrower can reclaim interest and fees they paid, plus interest. The guarantor can ask to be released and refunded any payments they personally made, plus interest. These are separate but related complaints about the same loan.
Will complaining hurt the guarantor's relationship with the lender?
Complaining is your legal right and the lender cannot penalise you for it. If the complaint is upheld, the guarantee is removed entirely, which protects the guarantor from any future demands on that loan.
Can I complain if the loan has already been repaid?
Yes, you can complain about a guarantor loan even if it has been fully repaid. If your complaint is upheld, the usual remedy is a refund of the interest and charges you paid, plus interest.
What if my loan was with Amigo?
Amigo is closed and can no longer deal with queries directly. If you were due a refund under their Scheme of Arrangement and did not provide valid bank details by 17 May 2025, you must apply to the court to release your funds. The Financial Ombudsman Service may still be able to consider complaints against Amigo, but their ability to enforce outcomes is limited by Amigo's insolvency.
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A self-serve tool, not a law firm. General information, not legal advice. Last researched 2026-10-08.