Regulator opposes Amigo Loans rescue plan
The subprime lender started to receive increasing numbers of complaints in 2018. Where a customer’s complaint is upheld, Amigo must refund the interest paid or update the outstanding balance.
Many of the complaints centred around affordability and mis-selling concerns. The FCA has been investigating Amigo over the way it assessed customers’ ‘creditworthiness’.
Amigo can’t afford to pay all the compensation claims in full so its board wants to use a ‘scheme of arrangement’ under part 26 of the Companies Act 2006 in relation to the group’s redress claims. Using the scheme would mean that customers who are owed money due to being mis-sold a guarantor loan will not be paid in full.
Amigo has asked its customers to vote on the scheme, saying it was likely to go bust if the scheme didn’t go ahead. In this scenario, customers would receive zero compensation owed for any outstanding complaint.
The Financial Conduct Authority previously said in March it didn’t agree with Amigo’s proposed scheme of arrangement, including over how mis-selling complaints would be assessed by the company and how much complainants would receive, but it wouldn’t oppose it.
But Amigo has now received a letter from the FCA stating that the regulator felt the scheme was unfair and it planned to oppose it in court.
The letter from the FCA to Amigo’s chief executive officers Gary Jennison said: “The FCA remains concerned that redress creditors will have their claims significantly reduced whilst other stakeholders, such as shareholders, are not being asked to contribute their fair share to enable the firm to stay solvent.
“The FCA also notes that the arrangements comprised by the scheme arise not out of negotiations with scheme creditors themselves (who are involuntary creditors of the scheme company) but out of a unilateral proposal by the scheme company which has not been the subject of any negotiation with scheme creditors or any body representative of their interests. The FCA considers that a fair compromise could have, but in this case has not been, proposed to scheme creditors to vote upon.”