Amigo Loans sinks to £38m loss af­ter flood of com­plaints

The Daily Telegraph - Business - - Business - By Michael O’Dwyer and Si­mon Foy

HIGH-IN­TER­EST lender Amigo Loans has tum­bled to a £38m an­nual loss af­ter a surge in cus­tomer com­plaints put its fi­nan­cial future at risk.

Amigo pen­cilled in a £127m charge for deal­ing with the cost of com­plaints for the year to March 2020. The fig­ure is ex­pected to rise as gripes kept pour­ing in over the following months.

The charge dragged the firm £38m into the red, in stark con­trast with a year ear­lier when it re­ported a pre-tax profit of £111m and spent just £100,000 on deal­ing with un­happy cus­tomers. Shares plunged nearly 30pc to 6.9p yes­ter­day, valu­ing the com­pany at £33m – a bru­tal fall from the £1.3bn it was worth when float­ing in 2018.

Amigo lends up to £10,000 to bor­row­ers with a low credit rat­ing, pro­vided they can find a friend or rel­a­tive who will prom­ise to step in if the bor­rower fails to re­pay. It charges in­ter­est of 49.9pc and has been de­scribed as a “le­gal loan shark” by cam­paign­ing Labour MP Stella Creasy.

The firm warned that the Covid-19 cri­sis has trig­gered ma­te­rial un­cer­tainty over its abil­ity to con­tinue as a go­ing con­cern following a col­lapse in de­mand for new loans.

It also blamed a po­ten­tial rise in com­plaints and the pos­si­bil­ity of un­pre­dictable penal­ties from the City watch­dog amid an in­ves­ti­ga­tion into its lend­ing prac­tices.

The board said it be­lieves the com­pany has enough money to sur­vive, with more than £135m of cash in hand at the end of June. How­ever, bosses said fresh funds will be needed if cus­tomer com­plaints do not drop.

James Be­n­amor, Amigo’s founder, hit out at the direc­tors af­ter the an­nounce­ment. He sig­nalled a pos­si­ble come­back just weeks af­ter start­ing to sell down his ma­jor­ity stake at a rate of 1pc per day.

On Twitter, he said: “Ev­ery new set of num­bers that comes out of Amigo proves that ev­ery­thing I have said since my first blog was ab­so­lutely true.”

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