Guarantor Terms
Status: v0.1 draft. Not in force. Guarantor loans are subject to specific consumer-credit rules in many jurisdictions (the UK has detailed FCA CONC 7 protections for guarantors); counsel sign-off required per jurisdiction.
Where this sits in the Custody Framework
This document operates under Category B of the Custody Framework Charter — the escrow-only category that governs lending pool capital, loan accounts, collateral escrow, and the Circle Protection Reserve. Member vote does not apply to Category B custody; the rule is constitutional. Accounts are opened in the name of the Members' own co-operative legal form, with a multi-signature mandate held by the Lending Committee.
Category A — regular cycle contributions in single-jurisdiction Circles, which may be Member-to-member or escrow-held by Member vote — is outside this surface. Category C — Circles that cross a jurisdictional boundary — adds the escrow-only rule to all funds in those Circles; this surface inherits Category C when the Circle is cross-border.
What you are signing as a guarantor
You are co-signing a loan made by the regulated lending entity to another Member. You agree to be jointly and severally liable with the borrower for the consumed unsecured capacity stated on your consent form. This is your maximum exposure on this loan.
Joint-and-several means the lender may pursue you directly for the consumed amount, without first exhausting the borrower. You may then pursue the borrower for what you paid (this is subrogation, §6 below).
1. Eligibility
You may guarantee a loan only if all of the following are true at the time of consent:
- You are an active Member of the platform in good standing.
- Your Standing is at or above the pool's unsecured floor for the loan's level.
- You have spare unsecured capacity at least equal to the consumed amount — that is, your own borrowing capacity has room above what you are currently borrowing.
- You are not within a 12-month default cooldown.
- You meet the KYC level required for the loan's pool.
- You are not the borrower's Treasurer in any circle in which the borrower also participates. This avoids the governance role doubling as a credit role.
The platform checks these conditions before accepting your consent. If any fail, you cannot consent. The lender will request another guarantor or another security type.
2. The consumed amount
The amount you guarantee is your consumed unsecured capacity. This is your share of the loan's secured portion (per the Collateral Terms §3.3), at the loan's LTV factor for guarantors (1.00).
Example: borrower requests £1,500, has £1,000 unsecured, needs £500 secured. You guarantee the £500 secured portion. Your consumed amount is £500. Your spare unsecured capacity is reduced by £500 for the loan's life.
If multiple guarantors back the loan, the consumed amount is divided among them by the lender's stated split. Each guarantor sees their individual consumed amount on their consent form.
3. Your reduced borrowing capacity
For as long as the loan is active, your own unsecured borrowing capacity is the formula result minus the consumed amount. You can still borrow up to that reduced figure.
When the loan repays or you are released from the guarantee (§5), your consumed amount is restored.
4. Your right to revoke before disbursement
You may revoke your consent at any time before disbursement by withdrawing it on the platform's guarantor consent surface. The lender will be notified; if no replacement is found, the loan will not disburse.
Once the loan disburses, you cannot unilaterally revoke. You remain liable until full repayment or release.
5. Release
You are released from the guarantee in any of:
- Full repayment. Loan closes; your consumed amount is restored.
- Borrower posts replacement security. With lender consent, the borrower may post additional collateral that fully covers the secured portion; your guarantee is then released.
- Borrower's Standing reaches a level that makes the secured portion fully unsecured. Rare; possible if the borrower repays material principal and Standing rises significantly mid-term.
- Loan write-down. Where the lender writes off part of the principal (uncommon outside structured default-resolution), the guarantee is reduced or released accordingly.
Release is recorded on your platform record. Your spare U immediately reflects the restored amount.
6. Subrogation
When the lender calls you and you pay (in full or by installment), you stand in the lender's place against the borrower for the amount you paid. You may:
- Pursue the borrower informally for repayment.
- Use the platform's dispute pathway to escalate a non-payment dispute against the borrower (Stage 1 Conciliation is free).
- Pursue the borrower in court for amounts above the platform's small-claims threshold.
The platform records that you paid as guarantor; your subrogation right is documented and assignable.
7. The call procedure
If the borrower defaults under the Member Borrowing Agreement §6, the lender executes the Loss Waterfall:
- Posted collateral is liquidated first.
- You are called for the consumed amount, after collateral and before the borrower's own pool stake set-off.
The call is delivered to you in writing, with:
- The amount called.
- The reason for the default declaration.
- The repayment options (immediate full settlement, or an installment plan no harsher than what was offered to the borrower).
- Your right to dispute the call through the Dispute Settlement Centre.
You have fourteen (14) days from the call to choose immediate settlement or to opt into the installment plan. If you do nothing, the installment plan applies by default.
8. Your right to dispute the call
You may dispute the call if:
- The default declaration is improper (e.g. installment not actually late).
- The consumed amount on the call exceeds what your consent form stated.
- The lender has not applied collateral correctly before calling you (the waterfall's step 1 must precede step 2).
Disputes go through the Dispute Settlement Centre under the Lending Dispute Pathway. Stage 1 Conciliation is free. Where the disputed amount exceeds the platform's small-claims threshold, the matter proceeds in the courts of the lender's jurisdiction.
9. Information rights
For as long as the guarantee is active, you have the right to:
- See the borrower's repayment status (on-time / late / missed) on the platform.
- See the loan's current balance.
- Be notified when an installment goes more than 14 days late (the early-warning stage, before formal default).
- Request, at any time, a statement of your potential exposure and the borrower's current state.
You do not have the right to see the borrower's other circle activity, contributions, or personal data beyond what is necessary to administer the guarantee. The platform's comm-isolation rules apply to you as a guarantor as they would to any other Member.
10. What this means in plain language
Being a guarantor is a real commitment. The platform's posture is:
- You should not guarantee for someone you cannot afford to repay for. If the borrower defaults and you are called, you will be expected to pay.
- You should not guarantee out of social pressure. The platform's Care Concierge is confidential if you feel pressured.
- Your own borrowing is reduced for the loan's life. You may need to wait for the loan to close before borrowing yourself.
- You are not the lender's employee. The lender pursues you; you do not pursue other Members on the lender's behalf.
11. Multiple guarantors
A loan may have multiple guarantors. The consumed amount is split among them per the lender's disclosed split. Each guarantor's call is for their individual share. Where one guarantor cannot pay their share, the lender does not transfer the unpaid portion to the others — that portion proceeds through the rest of the waterfall (steps 3–6).
12. The platform's role
Circlworld records your consent, computes the consumed amount against your spare U, surfaces the loan's status to you, runs the dispute pathway, and tracks your subrogation right after a call.
Circlworld does not call you. The lender calls you. Circlworld does not chase you. Circlworld does not collect from you.
You agree to the Platform Indemnification §4 in respect of any claim you might bring against Circlworld arising from your guarantee.
Reminder: v0.1 draft. UK FCA CONC 7 imposes specific protections for guarantors of consumer loans (warnings, time-to-consider, restriction on continuous payment authority from guarantors); the UK addendum in the Jurisdiction Disclosures will codify those. Other jurisdictions have similar protections.