Not upheld: Guarantor loan complaints complaint against Iwoca Ltd

Decision detail

Summary

Mr C, as director of a limited company, signed a personal guarantee for a business loan from Iwoca in July 2024. He complained that Iwoca acted irresponsibly by not conducting sufficient affordability checks to ensure he could repay if the guarantee was called upon, and that the risks were not made sufficiently clear. After a key client entered administration in September 2024, the business fell into arrears and Iwoca pursued recovery against Mr C as guarantor. The ombudsman found that because this was an unregulated business loan (not a regulated consumer credit agreement), Iwoca was only required to take reasonable and proportionate steps rather than conduct a full affordability assessment. The ombudsman was satisfied that Iwoca's credit checks and reliance on application information were proportionate, the guarantee documentation was clear with appropriate warnings, and the subsequent financial difficulties were unforeseeable. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman determined that because this was an unregulated business loan to a limited company (not a regulated consumer credit agreement), Iwoca was not required to carry out the same level of affordability assessment as would apply to regulated guarantor loans. The relevant standard was whether Iwoca took reasonable and proportionate steps in line with good industry practice. The ombudsman found that reviewing Mr C's credit file and relying on application information was proportionate, particularly given Mr C was the director choosing to guarantee the business's borrowing. The subsequent financial difficulties arising from the key client entering administration could not reasonably have been anticipated at the time of lending. The guarantee documentation clearly set out the nature and risks of the obligation with appropriate warnings.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website