How we can help with complaints about different types of credit and borrowing money.
How we handle complaints about borrowing money
We see a variety of complaints from small businesses about financial businesses who offer credit products and services. Credit covers a range of specific types of credit products, such as business loans, mortgages and overdrafts.
We look at the facts and circumstances of each individual complaint. We listen impartially to both you and the financial business when deciding what’s fair and reasonable in the circumstances.
Once we’ve considered everything, we’ll set out our findings, explaining whether we think the business has treated you fairly, or not. If we think the business has treated you unfairly, we’ll set out what we think needs to be done to put things right.
Complaints we see
The sorts of issues we see involving lending include:
- how the lending was originally set up – affordability and the structure of the lending, or that the lending request was unfairly declined
- the level of interest and charges, including exit fees
- misrepresentation of terms, conditions, exclusions or features, or that they were not explained
- administration and delays
- withdrawal of the facility resulting in financial difficulties to the business
- the action taken by a lender in trying to recover a debt or enforce a security
- interest-rate hedging and fixed rate loan products, particularly about “break costs” – the charges for leaving the arrangement early
Company complains about conditions of a loan not being made clear
Company E approached Company F, an independent broker arranging business finance, for a loan of £200,000. Company F contacted a lender who approved the application. However, Company E didn’t proceed with the loan.
A few weeks later, Company E contacted Company F again but only for a loan of £120,000. Company F considered that, even for this lower amount, the same lender offered competitive rates and, on its recommendation, the loan agreement proceeded.
A condition of the lending was that any existing loan that Company E had with another lender should be settled and this would be done with a portion of the funds being borrowed. Company E realised what had happened only when £40,000 was deducted from its loan to settle an existing loan with another lender.
Company E complained to us that Company F did not make this clear. They said that they had made it clear to Company F that they needed the full £120,000 to purchase some office equipment and that this would be in addition to the existing loan. They said that they had to incur a substantial break cost due to closing their existing loan early.
Company F said that it had made it clear to Company E that the lender had this requirement as a condition of finance, so it had done nothing wrong.
What we said
We noted that the loan agreement from the lender did not make it clear that any existing loan would be settled with part of the borrowed funds. However, we found that the lender did highlight this to Company F via email both at the time of the initial application (which did not proceed) and at the time of the second application.
We saw that Company F had discussed this condition with Company E at the time of its first application, but it did not highlight it at the time of the second application. This is despite the fact that, at the time of the second application, Company E had made it clear to Company F that it wanted to keep the existing loan.
We believed Company E was entitled to rely on Company F having taken their request into account when it made its recommendation. Therefore, we concluded that Company F should compensate Company E for any loss they suffered as a result of its failure.
Company E were able to show that they suffered a break cost with the existing lender because of the early closure. This was something they wouldn’t have incurred otherwise. However, they were not able to demonstrate any consequential loss arising from only receiving £80,000 when they wanted £120,000.
So we asked that Company F reimburse the break cost together with interest. Both parties accepted our recommendation.
Company complains to us when their loan application is rejected
Roger, the director of Company G, wrote to the company’s bank asking whether it would be possible to secure additional funding for the business. The relationship manager at the bank said that he would pass the request to the lending department.
Some time later, the lending department contacted Roger, asking him to complete a loan application and to provide a number of supporting documents and calculations. Roger promptly complied with this request. However, within a couple of days, the bank wrote saying that the loan application had been rejected.
Roger was unhappy with this decision as his company was in good financial health. He said that the bank had wasted his time in asking for so much information only to reject the request.
What we said
We said it was reasonable for a lender to request the information it needed to get a full picture of the applicant’s position, and there was nothing to show that the bank had led Roger to believe that the additional funding was assured.
We acknowledged that Roger was of the view that his business was in a sound financial position but we explained that it’s not our role to tell lenders who they should lend to or how much.
In this instance, we noted that the bank decided to decline the loan based on its assessment of the company’s affordability, taking into account criteria such as levels of existing borrowing, projected cashflow and previous account conduct. We could see that all of these factors were considered consistently with the bank’s lending policy. Also, we noted that there had been a second review of the application at a more senior level and the same outcome had been reached.
Taking all of the above into account, we concluded that the bank had handled the company’s loan request fairly, so we didn’t ask the bank to take any further action.
CBILS and BBLS
Please see our dedicated Covid-19 (coronavirus) page that contains more information about CBILS and BBLS and how we can help.
We can help with complaints from individuals who have given a personal guarantee or security in respect of their own business – but only in relation to any guarantee or security given on or after 1 April 2019.
For information about complaints from individuals who have given a personal guarantee or security in respect of someone else’s business or another individual, please find more detail on our main website.
How to complain
Bringing a complaint to us is straightforward and won’t cost you anything. Find out more about our process and making a complaint to us, or use our online form to register a complaint.
How long it takes
Read more about when you can expect to hear from us once we’ve started to investigate your complaint.