Amigo Loans has said it plans to wind down its business and halt all lending with immediate effect as it realised it would not be able to meet the terms of a High Court scheme which was intended to compensate customers. The business said that after exploring several options it had been forced to use its "fallback option" and would wind down by the business and use the money to pay off customers who were due redress.
It said: "The fallback solution requires that the trading subsidiary, Amigo Loans Ltd stops lending with immediate effect and is placed into an orderly wind-down, with the result that all surplus assets after the wind-down are transferred to the scheme creditors. In due course, (Amigo Loans Limited) will be liquidated."
It means that customers who were due redress payments will lose out on the £15 million that Amigo hoped to raise from private investors. But they will still get the rest of the compensation they have been promised.
Chief executive Danny Malone said: "This is a very sad day for all our employees who have worked extremely hard to address historic lending issues and rebuild a new Amigo, and for our shareholders and wider stakeholders who have supported us. It's also a sad day for creditors due redress who will now receive a lower level of cash compensation than they would had the new business conditions been satisfied."
Bournemouth-based Amigo specialised in subprime guarantor loans - the type where a borrower's friends or family promise they will pay back the loan if the borrower cannot. Customers would borrow at interest rates of around 50%.
Such loans are generally used by people struggling to borrow from other sources - but the lenders have a duty to ensure the people who borrow can still afford the loans. According to a decision from the Financial Conduct Authority (FCA), the lender "did not have appropriate processes in place to ensure it adequately assessed borrower and guarantor circumstances before approving a loan" between November 2018 and March 2020.
"Amigo's failures led to a high risk of consumer harm, both to borrowers and guarantors," the FCA said. The regulator said it would have fined Amigo nearly £73 million but decided not to because that would take away from the compensation customers would get.
