City watchdog censures Amigo but spares it £73m fine
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Subprime lending group Amigo spared a £73m fine as the city’s watchdog fears the lender would collapse and fail to compensate mis-sold clients
- Amigo put customers at ‘high risk’ of harm after failing to check affordability
- The FCA would have fined the lender £72.9 million for such failures
- But the move would have hampered Amigo’s ability to compensate customers
The Financial Conduct Authority spared Amigo a £73m fine despite the lender putting clients at a ‘high risk’ of harm.
The Financial Conduct Authority closed its investigation into the troubled lender, saying it would have fined Amigo £72.9m but decided to waive it as it affected its ability to pay bad buy compensation to customers , would hinder.
Amigo, which specializes in guarantor loans, has been struggling to survive since it was told it had to compensate thousands of customers who received mis-sold loans and were forced to stop borrowing in early 2020.
Probe: The FCA said that Amigo puts its commercial interests above those of its customers
The FCA said its investigation found that between November 2018 and March 2020, Amigo put its commercial interests ahead of those of its customers because it failed to “adequately” assess the borrower and guarantor’s circumstances before approving a loan .
Such failures led to a “high risk of consumer harm, both for borrowers and guarantors,” it added.
For this reason, the FCA has ‘censored’ the company.
The move serves as a warning to raise awareness of regulatory standards and principles in the wider market, with the aim of changing the behavior of the censored company and deter others from engaging in similar activities.
“The FCA would have imposed a £72,900,000 fine, but Amigo has shown that doing so would put it in serious financial trouble,” the regulator explained.
“A fine would also have threatened Amigo’s ability to meet its obligations under a Supreme Court-sanctioned settlement, which aims to indemnify customers.”
A compensation scheme was finally approved by a Supreme Court in May last year, but was conditional on Amigo completing a successful capital raise in May 2023 and resuming lending in February.
It returned to loans “under close supervision” by the FCA in October, but warned that the cost-of-living crisis had made that more difficult as customers often failed to make loan payments.
Last month, however, it said it had so far failed to find a major investor willing to back it.
It will be forced to wind down the business if it doesn’t find one by May, leaving mis-sold customers with less compensation than they otherwise would have received.
Amigo Shares rose 27 percent in afternoon trading Tuesday to 3.35 pence.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: ‘Amigo has not properly assessed the affordability of its loans, especially to vulnerable consumers, as required by our rules.
This led to loans that were unaffordable for some and meant that guarantors had to step in.
“It also resulted in the company’s commercial interests taking precedence over its obligation to comply with the rules and protect customers from unaffordable loans.”
Danny Malone, Amigo’s CEO, said the end of the investigation allowed the company to draw a line under these “historic issues” as it sought the capital it needed to stay afloat.
“I would like to once again apologize to all affected customers for the previous shortcomings in lending in the period 2018-2020,” he added.
“As a new board and management team, we fully accept the lessons to be learned for the future and our focus remains on rebuilding a business that delivers better outcomes for customers, supported by stronger credit controls and a better culture.”