The Financial Conduct Authority (FCA) had already opposed Amigo’s ‘scheme of arrangement’ which the company proposed under part 26 of the Companies Act 2006. The High Court has now also refused to sanction the scheme proposed by Amigo.

Using the scheme would mean that customers who are owed money due to being mis-sold a guarantor loan would not be paid in full.

The FCA says it has, through its continued engagement with Amigo and participation in the court hearing, sought to get a better, fairer deal for Amigo’s customers due redress.

The regulator believes that a fairer compromise could have been offered to customers. It told the High Court that the scheme proposed was ‘inherently unfair’, as it placed a disproportionate burden on customers, as opposed to shareholders and bondholders, to keep the company afloat.

The FCA believes that Amigo can propose a fairer scheme to customers. It says the company should also ensure that its customers are fairly represented and advised on alternative proposals for a scheme.

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FCA regulated firms must maintain adequate financial resources which includes taking account of the need to pay redress liabilities. The regulator says it has ‘significant concerns’ about schemes of arrangement being used by firms to unfairly avoid paying customers redress.

Amigo started to receive increasing numbers of complaints in 2018. Many of the complaints centred around affordability and mis-selling concerns. Where a customer’s complaint is upheld, Amigo must refund the interest paid or update the outstanding balance. However, it cannot afford to pay all the compensation claims in full.