Amigo Loans customers are one step closer to receiving compensation for mis-sold loans as the City watchdog revealed it would not oppose the lender’s latest rescue plan.
The Financial Conduct Authority said it won’t appear in court to either oppose or present evidence regarding the scheme, which marks a ‘significant improvement’ compared to its first.
If the scheme is approved, Amigo is expected to avoid collapse and claimants who were mis-sold loans could get back 41p of every £1 they’re owed.
Amigo Loans could avoid collapse if the latest rescue plan is approved by the court
Since late 2020, the controversial lender has had to pause lending after a deluge of complaints that it had sold loans to borrowers who could not repay them and had not undertaken the necessary affordability checks.
Amigo initially proposed a compensation package that would have capped payouts at around 10p for each £1 customers were owned, but this was resolutely rejected by the High Court last year.
Today, the FCA has reiterated that there has been a ‘significant improvement in the fairness of the schemes’ compared to the first offer.
‘The FCA has assessed the Schemes by reference to the FCA’s statutory objectives and has concluded, in light of its assessment of the Schemes, that it does not consider it necessary to appear at the sanction hearings either to oppose the Schemes or to present any evidence of its own concerning the Schemes,’ the watchdog said.
Gary Jennison, chief executive of Amigo, welcomed the news.
‘These confirmations are positive steps towards delivering the best outcome possible, given the circumstances, for our customers, creditors and other stakeholders,’ he said.
‘There remain significant obstacles to overcome, including the need for a significantly dilutive equity issue, to recapitalise the ongoing business given the requirements of the Schemes for the transfer of virtually all existing assets to the redress creditors.’
The business has repeatedly warned it could go bust if the latest scheme is not accepted.
Amigo lends money to those with a poor credit score, as long as they have a friend or family member – a guarantor – willing to pick up the bill if they can’t.
But it fell foul of regulators in 2020 when rule changes surrounding affordability checks meant thousands of customers could claim they had been mis-sold their loans.
