High-cost lender TFS Loans went bankrupt after running out of cash due to customer demand for repayment.
The guarantor loan company has appointed trustees after it was unable to meet the cost of compensating customers for unaffordable loan applications.
Opus Restructuring, which was hired as a director this week, said “the main causes of business failure are rooted in unaffordable loans“.
This led to complaints to the Financial Ombudsman Service and resulted in compensation payments being awarded.
TFS ceased lending in February 2021 “due to deficiencies in its complaint handling processes and procedures”.
It ran out of cash in January this year when it was unable to meet customer demand for reimbursement.
Guarantor loans are when someone else – for example a friend or family member – agrees to pay the money back if you cannot make the payments.
The company charged an APR of between 29.9% and 39.9%.
Other companies in the sector have gone bankrupt in recent years, including payday lender Wonga and home loan company Provident.
Besides the influx of customers, TFS also blamed the pandemic on its decline, due to a drop in lending during the lockdown.
Opus said: “It was necessary to place TFS into administration in order to protect the business and the interests of creditors.
“We would like to emphasize to customers that this does not change the terms of any loans they have taken out with TFS Loans Limited.
“It is important that all customers continue to repay their loans in accordance with the terms of their agreements, as continuing to do so will have a positive impact on their credit rating.”
What are my rights if I am a client of TFS Loans?
Administrators of Opus Restructuring said customers should continue to repay their loans.
We asked what the administration means for customers with claims against the lender, and we’ll update this page when we know more.
It’s also unclear whether new claims can be made.
If you are expecting a compensation payment from TFS, you should contact the administrator.
Opus said: “The Opus administration team will provide detailed communications to all customers and creditors of the company once they have completed a detailed assessment of the business.”
In similar situations, claimants have not received the full amount owed to them.
For example, Wonga victims only received 4 pence for every pound sterling they had to be paid.
Consumers should also be wary of scammers trying to take advantage of the situation.
TFS said it would never ask for your bank details over the phone.
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