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Amigo to relaunch as RewardRate offering loans from 39.9% APR

Paloma Kubiak
Written By:
Paloma Kubiak

Amigo is set to resume lending early next year under a new guise – RewardRate – offering ‘responsible finance’ to an ‘underserved market’.

The firm is set to restart lending by 26 February 2023 and has today confirmed it will trade under a new brand – RewardRate.

It will offer two loan products – a personal loan starting at 49.9% APR and a guarantor loan product from 39.9% APR.

Both products will offer the borrower the chance to reduce the interest rate charged by up to 15 percentage points (down to the equivalent 34.9% APR) if they make payments on time.

Further, customers will also be able to freeze a payment once a year, without penalty.

No new lending will take place under the Amigo brand. It said in shaping the proposition, Amigo’s management team has “taken learning from Amigo’s past to ensure a customer-centric compliant and responsible culture is at the core of the business as well as an improved underwriting process with enhanced affordability checks for customers”.

It added that pre-March 2020 loan products will not be sold again, with the legacy book continuing to run off.

The new lending proposition is subject to Amigo receiving consent from the regulator, the Financial Conduct Authority, and it must complete a successful equity raise by 26 May 2023.

It has agreed a £35m cap on net new business lending before the proposed capital raise is completed. The £35m of planned new lending is being funded by internal resources.

The table below shows a comparison of the old and new lending products:

‘Underserved market’

Amigo said there are an estimated 12 million adults in the UK who can’t obtain a loan from a mainstream lender due to credit impairment, low credit status or no credit history.

It said it has a “stated purpose” to help this group “achieve financial mobility”.

A statement read: “Today, people face credit exclusion on an unparalleled scale in UK credit markets following the departure of specialist lenders from the sector, at a time when changing economic fundamentals, including the growth of the gig-economy and the aftermath of Covid, have led to rising demand. The result has been, as the England Illegal Money Lending Team warned recently, that ‘opportunistic illegal lenders are filling the void’.”

Amigo added that with its 15 years’ experience in the guarantor loans market and an established infrastructure, “it has learnt from the mistakes of the past” and intends to “put our infrastructure and institutional knowledge of the specialist lending market to good use”.

Chief executive, Gary Jennison, said: “RewardRate has been designed to support financial mobility for the millions of people in our society who have too few borrowing options. It has been created by a new team, in collaboration with external partners, with the objective of incentivising and rewarding on time payment and thus moving people towards a better credit rating and onto mainstream banking. RewardRate is backed by a company that has undergone profound cultural change under new management and, once we have FCA approval, we believe it will be an important new addition to the mid-cost market.”

Amigo’s new business scheme

Today’s announcement is part of a long process for former Amigo borrowers to get redress.

Back in 2018, Amigo began receiving affordability complaints and mis-selling concerns. Where a customer’s complaint was upheld, Amigo was ordered to refund the interest paid or update the outstanding balance.

However, with an influx of compensation claims, Amigo faced collapse and so in May 2021, it published a rescue plan which was rejected by the High Court for being ‘inherently unfair’.

In December 2021, Amigo proposed two new alternative redress schemes, with both options seeing affected borrowers receive less money than they were owed.

But in March 2022, the regulator, the Financial Conduct Authority confirmed it wouldn’t oppose Amigo’s scheme of arrangement proposals.

And just last month, a creditors meeting took place where borrowers voted on the two alternative redress schemes. A majority total of 145,532 votes were in favour of Amigo’s preferred ‘new business scheme’ which would see it return to lending and offer cash returns to creditors at an estimated 42p per £1 of claim.

In order for the new business scheme to get the go ahead, it required sanction by the High Court which was confirmed in May.