FCA to investigate personal guarantees in small business lending following a super complaint

Sarah Naylor

Sarah Naylor


The Financial Conduct Authority (FCA) has announced that it is to investigate the use of personal guarantees by lenders to support loans to certain small businesses following a super-complaint from the Federation of Small Businesses (FSB). The FCA’s remit does not include lending to limited companies, but the regulator says it is committed to ‘do what it can to support small businesses within its defined remit’. If the FCA’s work identifies relevant information, it will share this with appropriate Government departments, in particular, the Treasury, as it considers reforming the Consumer Credit Act 1974.

The FSB has raised concerns that the demand for personal guarantees by lenders has a detrimental impact on small businesses accessing borrowing to grow.

The FCA intends to:

  • collect data (from April to June 2024) to gauge how common personal guarantees for sole traders and small partnerships borrowing less than £25,000 are;
  • review a sample of firms’ policies and procedures to understand when personal guarantees are required for loans that come under the FCA’s regulation (although the FCA’s remit does not include lending to limited companies);
  • work with the Financial Ombudsman Service to monitor the levels of complaints about this issue;
  • consider whether lenders need further guidance on how to apply the FCA’s rules and guidance within its Consumer Credit Sourcebook to situations where a personal guarantee is in place. If this is required, the FCA says that it will consult on and publish guidance.

The FCA also says that its investigation may be of value to Parliament and its relevant committees as and when they look at business banking and related issues and consider whether greater protection should be available to small businesses; no doubt small businesses and lenders alike will be very interested in the FCA’s output.

If you have any queries about this article, please contact a member of the Banking and Finance team.


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