Amigo Loans has announced it will wind down its business and halt all lending with immediate effect.
The highstreet lender said that 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.
It also said it would use the money it has to pay off customers who are due money.
However, customers who were due redress will lose out on £15million that Amigo hoped it would raise from private investors.
Amigo Loans did say those affected will still get the rest of the compensation they have been promised.
In a statement, Amigo Loans 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."
Danny Malone, chief executive of Amigo Loans 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."
Launched in 2005, Amigo Loans specialised in subprime guarantor loans, which is where a borrower’s friends or family promises to pay back the loan if the borrower can't.
Customers would borrow at interest rates of around 50%.
These types of loans are usually used by people who are unable to borrow money from other sources.
However, Amigo Loans would still need to make sure the borrower can afford to pay back the loans in full.
According to a decision from the Financial Conduct Authority (FCA) published last month, Amigo Loans "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.
It said: "Amigo's failures led to a high risk of consumer harm, both to borrowers and guarantors."
The regulator said it would have fined Amigo nearly £73million but decided not to because that would take away from the compensation customers would get.
Sara Williams, who runs the Debt Camel blog, said: "Amigo's very poor lending has caused hardship and misery for hundreds of thousands of customers.
"Amigo will be liquidated but the current Scheme to pay some reduced refunds to customers continues 'in fallback mode'.
"There will be a bit less money for refunds but the decisions on claims should continue and people should still be paid this year.
"Originally Amigo said it expected to be able to pay 41p in the £ in the Scheme. So if you should have had a refund of £1,000 you would get £410.
"But a lot more customers have claimed than Amigo expected so by November that estimate had been reduced to paying 20p in the pound.
"Now, in fallback mode, that will reduce to about 17p in the pound, on the November numbers."
