Financial Conduct Authority
Consumer credit affordability checks - FCA publishes final notice - 10 June 2022
The FCA has published a final notice (dated 9 June 2022) with respect to TFS Loans Limited (In Administration) (TFS) and has issued a fine of £811,900 in relation to deficient affordability checks on 3,150 guarantors in its consumer credit business between 2 November 2015 and 10 April 2018. 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. TFS’ failure to collect appropriate information on the 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. 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. 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 has required TFS to provide redress to the guarantors, and where needed, to repair their credit history and to release guarantors from liability under any continuing guarantees.
TFS qualified for a 30% discount to the fine under the FCA’s executive settlement procedures. 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. They will then be contacted by the joint administrators about redress and how to make a claim in the administration of TFS.
FCA Final Notice: TFS Loans Limited (In Administration) (“TFS”)