A Guarantor now free from financial bondage – defeats lender Amigo Loans in court

Hafiza Abbas -v- Amigo Loans

Although this is not a landlord-tenant case, it is nevertheless compelling. Landlord Advice UK, one of the leading tenant eviction companies, took on Amigo Loans, a major UK Loan company.

They assisted the defendant, Miss Hafiza Abbas, in September 2016 and won.

It is not ideal to use separate contracts

Mr Sasha Charles of Landlord Advice UK said, “This case ought to focus the minds of all landlords and letting agents when preparing guarantors’ agreements.

Ideally, the Guarantors’ agreement should be incorporated into one single agreement.

He said the guarantor and all the tenants should sign one agreement so there can be no contention, as opposed to having two agreements, a tenancy agreement and a Guarantor agreement.

Amigo Loans rely on Guarantors

Briefcase details: – Amigo Loans is a loan company that markets itself as a loan option for people with bad credit history.

In a nutshell, Amigo Loans helps potential borrowers who have no hope of getting a loan due to poor credit history. Amigo Loans will only lend if the borrower can provide a suitable guarantor.

In this case, the guarantor, Miss Abbas, was a single mother and an NHS worker. Someone she considered a friend approached her and asked her to be a Guarantor. Miss Abbas agreed to stand as a guarantor.

Amigo Loans sent a contract for the Guarantor to sign, which she duly signed and returned to Amigo Loans. She did not receive a copy of the agreement between the lender and the borrower.

Upon receiving the loan money through Amigo Loans, the borrower took a one-way ticket to South Africa and disappeared. Needless to say, the Guarantor was very upset. She said, “I never thought my friend of 30 years would do that to me.”

Miss Abbas repeatedly requested that the lender provide the agreement between the lender and the borrower. She wanted to see what she was standing as a guarantor, too.

Crucially, in this case, it is understood that the Guarantor requested to see a copy of the contract between the lender and borrower within the cooling-off period.

Although requested by the Guarantor and through Landlord Advice UK, Amigo Loans persistently refused to provide the contract.

Case: Hafiza Abbas -v- Amigo Loans

Amigo Loans issued a claim against Miss Abbas, a guarantor. Amigo Loans was seeking Miss Abbas to pay a debt of over £5,000.

The Amigo Loans Limited v Abbas trial occurred at Reigate Country court on 14th September 2016. Amigo Loans did not attend the court but was represented and submitted a witness statement as evidence.

The district judge advised that the evidence was heavily disputed on the point of law before adjourning the hearing so the claimant’s representative could take instructions. The claimants, Amigo Loans, through their Counsel, decided to continue.

The court found Amigo Loans had breached principal obligations under the Consumer Credit Act 1974 and other acts and regulations.

Amigo Loans failed in claiming that they had complied with the relevant legislation.

District Judge Beck concluded that the guarantor agreement could not stand. The learned judge found no evidence to suggest that a copy of the borrower’s contract was provided to the defendant.

The guarantor agreement was deemed unenforceable. The claimant’s application was defeated.

Amigo Loans’ application to appeal against the decision was refused.

Landlord Advice UK supported the defendant in the court proceedings. Initially, it is understood that Amigo Loans believed the Guarantor was not entitled to the agreement due to data protection laws.

The evidence also indicates that Amigo Loans failed to file a cancellation notice with the Guarantor.

Landlords Need to be aware

Sasha Charles, a Housing Lawyer at Landlord Advice UK, said, “The case highlights Amigo Loans’ poor conduct and failure to protect consumers, as required by law. Amigo Loans’ conduct may put guarantors at an unfair disadvantage due to non-compliance.

This case should serve as a warning for landlords and agents. Some landlords and agents use unenforceable guarantor agreements and may not be able to claim back their debts should their tenants default on payments. he said”

The ombudsman releases a guarantor from a loan

Sara Williams, published by Camel Debt, has written a fascinating related article. The Financial Ombudsman (FOS) recently published two important decisions about guarantor loans, one where a borrower complained and one where the Guarantor complained.

Key Legal Principles in Guarantor Agreements

  1. Consent and Understanding: A fundamental aspect of a valid guarantor agreement is the guarantor’s full comprehension of their responsibilities. Courts scrutinise the clarity and transparency of contractual terms to ensure that the guarantor willingly assumes the obligation.

  2. Capacity and Voluntariness: The law requires guarantors to possess the legal capacity to enter into contracts voluntarily. Any indication of coercion or undue influence may render the agreement voidable.

  3. Financial Disclosure: Guarantors must receive sufficient information regarding the borrower’s financial position and ability to repay the loan. Inadequate disclosure could invalidate the guarantor’s consent.

  4. Limitation of Liability: While guarantors commit to guaranteeing the borrower’s obligations, the extent of their liability should be clearly defined in the agreement. Ambiguous or overly broad terms may subject the guarantor to unintended financial risk.


1. What is a guarantor loan?

A guarantor loan is a type of loan where a third party, known as a guarantor, agrees to repay the loan if the borrower defaults.

This provides added security to the lender, allowing individuals with limited credit history or poor credit scores to access financing.

2. Who can be a guarantor?

Typically, a guarantor is a family member or friend with a stable financial standing who is willing to vouch for the borrower’s repayment capability.

Lenders may have specific criteria regarding the eligibility of guarantors, so it’s essential to check with the lender beforehand.

3. What are the responsibilities of a guarantor?

The primary responsibility of a guarantor is to repay the loan (or tenancy breach) if the borrower fails to do so. Guarantors should thoroughly understand the terms of the loan agreement and be prepared to fulfil their obligations if necessary.

Guarantors must assess their financial capacity and willingness to take on this responsibility before agreeing to become a guarantor.

4. Can a guarantor withdraw from the agreement?

A guarantor has a 14-day cooling-off period. In most cases, once a guarantor has signed the agreement, they are legally bound to fulfil their obligations unless specific provisions for withdrawal are outlined in the contract.

However, circumstances may arise where a guarantor seeks to withdraw, such as changes in financial circumstances or disputes over the loan terms. It’s advisable for guarantors facing such situations to seek legal advice to understand their options and potential consequences.

5. What happens if the borrower defaults on the loan?

If the borrower defaults on the loan (or tenancy) , the lender may pursue repayment from the guarantor according to the terms of the agreement.

This could involve legal action to recover the outstanding debt. Guarantors should be aware of their potential liability and be prepared to fulfil their obligations if the need arises.

6. Are there risks involved in being a guarantor?

Yes, there are risks associated with being a guarantor. If the borrower fails to repay the loan, the guarantor is legally obligated to step in and repay the debt.

This could potentially impact the guarantor’s credit score and financial stability. It’s essential for guarantors to carefully consider these risks and assess their ability to fulfil their obligations before agreeing to become guarantors.

7. How can I protect myself as a guarantor?

To protect yourself as a guarantor, it’s crucial to fully understand the terms of the loan agreement and seek legal advice if necessary.

Additionally, maintaining open communication with the borrower and lender can help address any issues or concerns early on. It’s also advisable to regularly review your financial situation to ensure you’re prepared to fulfil your obligations as a guarantor if needed.

You must have sight of the tenancy agreement or the loan agreement before you agree to be a guarantor. You must know what liability you are standing as a guarantor for.

Sara has comprehensively covered the borrower case here: Ombudsman – Amigo did not check properly that a borrower could afford the loan.

The Lawyer who dealt with the Amigo Loans case was Mr Sasha Charles.

Source: British Landlords Association

Author: Marc Attwater

Date: 22nd of March 2024

Latest 2024 Assured Shorthold Tenancy


This post is for general use only and is not intended to offer legal, tax, or investment advice; it may be out of date, incorrect, or maybe a guest post. You are required to seek legal advice from a solicitor before acting on anything written hereinabove.

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