Amigo goes cap in hand to customers to stop insolvency
AMIGO Loans is fighting to avoid going bust and has asked borrowers to back a restructuring that will result in lower compensation payouts for customers sold unaffordable loans by the firm.
The high-cost lender’s boss Gary Jennison said that the company will go insolvent and people owed compensation will receive nothing if customers reject the scheme of arrangement implementing the plan.
Mr Jennison said: “The counterfactual to a scheme of arrangement, we think, is insolvency. And that means that creditors [would] get nothing.”
Amigo lends to people with poor credit scores at rates of 49.9pc, provided a friend or family member agrees to act as a guarantor. It has been buffeted by a series of boardroom crises and a surge in customer complaints, which it estimated would cost it £150m.
Mr Jennison, who became chief executive in September, blamed claims management companies and the Financial Ombudsman for the company’s woes. He said: “The root cause of the problem, of course, is that the claims management companies are increasing their intensity with us. The challenge we’ve got is that so many of their claims are just completely spurious. We have not been getting the support from the FOS when we have defended claims.”
Amigo will now attempt to contact 1.3m customers and their guarantors asking them to back the restructuring.
It will need support from a majority of creditors who cast a ballot, represent
ing at least 75pc claims by value. The plan also needs court approval.
Under the plan £15m will be set aside to deal with any complaints that had not been resolved before Monday. Up to £ 20m could be added to the pot depending on how many customers offset their awards against the outstanding balances on their loans.