FCA commits to personal guarantee investigation

FCA has committed to conducting an investigation into the use of personal guarantees by lenders as security for loans made to small business customers. FCA is acting in response to a super complaint brought by the Federation of Small Businesses (FSB). Both FCA and FSB acknowledge that only a small subset of lending (and associated personal guarantees) fall within the remit of FCA (because the underlying lending constitutes a regulated consumer credit agreement or a regulated mortgage contract).

To that end, FCA’s investigation will be limited to:

  • collecting data (from April-June 2024) to understand the number of personal guarantees in place for sole traders and small partnerships borrowing less than £25,000;
  • reviewing a sample of firms’ policies and procedures to understand when personal guarantees are required for loans that come under FCA’s remit;
  • working with the Financial Ombudsman Service (FOS) to monitor the levels of complaints about this issue; and
  • considering whether lenders need further guidance on applying the FCA’s rules and guidance within the Consumer Credit Sourcebook to situations where a personal guarantee is in place.

This is the first super complaint received by FCA since the regime was introduced into section 234C of the Financial Services and Markets Act 2000 in 2013.

Duncan Scott