On 5 March 2024, the UK Financial Conduct Authority published a press release announcing it is investigating the use of personal guarantees given to lenders to support loans made to certain small businesses. The follows the Federation of Small Businesses making a ‘super-complaint’ to the FCA.
The FCA’s perimeter is, in fact, fairly limited for business lending. It only applies to such lending where (in broad terms):
– the borrower is an individual or a relevant recipient of credit (being a partnership of two or three persons not all of whom are incorporated, or an unincorporated body of persons which does not consist entirely of bodies corporate and is not a partnership); and
– the amount of credit is no more than £25,000.00.
The FCA will:
– collect data between April 2024 and June 2024 to understand when lenders entering into a regulated credit agreement are asking for guarantees;
– review samples of firms’ policies and procedures;
– work with the Financial Ombudsman Service to monitor the level of complaints; and
– consider whether lenders need further guidance in CONC.
The FCA has also published its response to the super complaint.