Financial Conduct Authority expresses alarm over rise in guarantor loans

Industry News | 23/04/19

The City watchdog has fired another warning shot at sub-prime credit companies that issue high-interest loans guaranteed by the family or friends of the borrowers. Andrew Bailey, chief executive of the Financial Conduct Authority, told The Times that a rise in the number of guarantors making at least one repayment on behalf of a borrower raised questions about lenders’ affordability checks. “We are asking some probing questions,” he said.

Guarantor loans are a fast-growing area, with the FCA estimating that balances have more than doubled since 2016 to almost £1 billion. The loans usually have interest rates of about 50 per cent and are made to individuals who have difficulty accessing credit.

Source: The Times