TFS Loans failed to undertake adequate affordability checks on 3,150 guarantors who were liable when borrowers were unable to pay their debts, according to the Financial Conduct Authority (FCA).

It said its failure to collect appropriate information on guarantors’ financial circumstances meant some were unable to afford agreements entered into, “risking significant personal financial repercussions and distress if those guarantees were called upon”.

In fact, the FCA confirmed this happened in some cases. It also revealed that TFS violated its own policies by charging excessive late payment management fees for customers who were already in arrears.

As such, the regulator said the high cost guarantor lender “failed to treat customers fairly” or to “take reasonable care to organise and control its affairs responsibly and effectively”.

It has fined TFS £811,900 – a 30% discount from the original £1.1m fine – and it has also been told to provide redress to affected guarantors.

However, the lender went into administration in February 2022 so the FCA said the fine will only be paid if there are funds left following payment to other creditors, including any redress payments.

Further, the redress payments and the number of affected customers are still to be confirmed as this is now subject to review by the joint administrators – Allister Manson and Trevor Binyon of Opus Restructuring LLP. However, the FCA confirmed the numbers affected will form part of the original 3,150 identified.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Friends and family members who agree to act as a guarantor for a loved one should feel confident that the lender will treat them fairly.

“The FCA’s affordability rules protects both consumer credit borrowers and guarantors from unaffordable risks. These requirements are high priority areas for the FCA especially as families face overall increases to their cost of living.”