Amigo Loans warns of collapse as it allocates £345m for compensation claims

Gary Jennison

Money lender Amigo Loans has warned that it may not survive after setting aside £345 million for mis-selling claims.

The company, which offers money to those with poor credit ratings, also revealed that its annual losses rose to £284m, compared with £38m in 2020.

Amigo, which offered loans with an interest rate of up to 49.9%, was forced to stop lending last year after thousands of complaints from customers who say they were approved for loans that they could never afford to repay.

A bulk of the complaints lodged against Amigo have emerged through claims management companies.

The Financial Conduct Authority (FCA) has ruled that a loan is unaffordable if making the repayments means someone has to borrow more money or get behind with essential bills.

The regulator has tried to negotiate a settlement that would have seen those customers who were mis-sold receive some kind of compensation, but it was rejected by the High Court in May. Amigo is preparing to present a new proposal to the FCA and the High Court. If this next offer is rejected, it is likely to go under.

Announcing its results, Amigo said there was a “material uncertainty” around its ability to continue as a going concern.

Gary Jennison, Amigo’s chief executive, said it had been an “incredibly difficult year” and said the team was “fighting hard to address the problems of the past in order to save Amigo, compensate those customers affected and continue to offer essential finance to the growing number of ordinary people who can’t access mainstream lending”.

He added that the “issues of the past are real, but do not diminish the need in society for lenders like Amigo”.

He concluded: “As the UK rebuilds in the wake of the Covid-19 pandemic, the need to provide financial inclusion has never been greater and I believe that Amigo has an integral role to play in keeping this section of the market competitive and accessible.”

Tags: Amigo Loans

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