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Amigo complaints triple as it sets aside £150m to settle claims

Paloma Kubiak
Written By:
Paloma Kubiak

Amigo revealed it received a spike in complaints as it raises provision to deal with the claims to £150m.

The guarantor lender confirmed a total of 25,571 complaints were required to be dealt with by a 30 October deadline agreed with the Financial Conduct Authority (FCA).

Originally, it was set a target of 26 June to clear a backlog of 9,000 complaints but after a substantial increase in numbers, the deadline was pushed back to the end of October.

It previously refused to disclose complaint numbers due to ‘commercial reasons’ but today’s update confirms it received nearly three times as many – 25,571.

As part of its progress report, it revealed it has yet to issue a final response to customers on 2,517 of those complaints.

Amigo stated: “Of the outstanding complaints yet to receive a final response by 30 October 2020, 2,209 relate to a specific group of complaints where significant guarantor payments on a loan have been a feature.

“The methodology for calculating redress for this specific group of complaints is being discussed with the FCA. Work to implement a revised redress approach has impacted our ability to issue a final response by 30 October 2020 for this section of complaints.

“Of the remaining outstanding cases, 238 relate to cases where Amigo continues to work with a third party to collect the necessary information required to allow Amigo to calculate the redress due.”

During the three months to 30 September 2020, Amigo settled around £47m of redress to customers, of which approximately 60% was settled by cash payments, and the remaining amount dealt with through loan balance adjustments.

It held cash of c.£140m as at 30 October 2020, and said it had “adequate liquidity to continue to fund operations and support customers”.

More on the complaints and timeline of events

Many of the complaints are believed to centre around affordability and mis-selling concerns with regulations stating borrowers must be able to afford loans without having to borrow more or falling behind on other bills and debts.

Amigo started to receive increasing numbers of complaints in 2018 and where a customer’s complaint is upheld, the lender must refund the interest paid or update the outstanding balance.

In January, Amigo put itself up for sale and launched a strategic review amid “a challenging operating environment” and concerns over “increased regulation”.

And in March at the start of the pandemic, it paused lending except for key workers in exceptional circumstance. Today it said given the continued uncertainty, it anticipated it won’t start lending again before 2021.

Then this summer, the sub-prime lender revealed it was being investigated by the FCA over the way it assessed customers’ ‘creditworthiness’.

Meanwhile, it entered an agreement with the FCA to clear a backlog of 9,000 complaints and set aside £35m as part of its plan.

However, as part of today’s update, Amigo said in light of the increase in complaints received, notably from claims management companies (CMCs), it expects to raise the provision for complaints from £116.4m in Q1 to a level “in excess of £150m”, leading to a profit hit in excess of £85m.

It will publish its results for the half year on 26 November 2020.

‘Turned a corner with complaints’

Gary Jennison, CEO of Amigo, said: “Amigo has reviewed and reached a decision on all cases included in the complaints voluntary requirement we agreed with our regulator. It is a testament to the efforts of the whole team that this has been achieved by the end of October, notwithstanding the c.10% of cases that have a specific, known reason why they have yet to receive their final response from Amigo.

“While operationally we have turned a corner with complaints, the sustained volume we are seeing will have an impact on the complaints provision going forward. We have placed the provision under review and a full update will be provided at our half year results. Working with our regulator to fix the complaints situation is our number one priority and this is non-negotiable.

“We will be back lending to our customers that need to access an Amigo loan as soon as we can, but do not envisage this being before 2021. We are fully aware of our responsibilities as a lender and the important role that we play for the millions of people in the UK that are unable to get a loan from a mainstream bank.”

An FCA spokesperson said: “We are aware the firm issued an update on complaints and the complaints voluntary requirement with the FCA. We can confirm we have been working with the firm regarding complaints and have no further comment at this time.”