Lender Amigo to wind down after failing to secure cash from investors
It was trying to raise enough money to keep trading and pay redress to customers.
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.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.
“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.”
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.