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