City watchdog censures Amigo but spares it £73m fine

Subprime loans group Amigo spared £73m fine as City watchdog fears the lender could collapse and fail to compensate mis-sold customers

  • Amigo put customers at ‘high risk’ of harm after failing to check affordability 
  • The FCA would have slapped lender with a £72.9m fine for such failures
  • But the move would have hampered Amigo’s ability to compensate customers 

The Financial Conduct Authority has spared Amigo a £73million fine, despite finding that the lender put customers at ‘high risk’ of harm.

Closing its investigation into the troubled lender, the Financial Conduct Authority said it would have hit Amigo a £72.9million fine, but had decided to refrain as this would hamper its ability to pay out mis-selling compensation to customers. 

Amigo, which specialises in guarantor loans, has been scrambling for survival since it was told to compensate thousands of customers who were mis-sold loans and forced to stop lending in early 2020.

Probe: The FCA said Amigo put its commercial interest ahead of its customers’

The FCA said that its investigation found that between November 2018 and March 2020, Amigo put its commercial interests ahead of its customers as it failed to ‘adequately’ assess borrower and guarantor circumstances before approving a loan. 

Such failures led to a ‘high risk of consumer harm, both to borrowers and guarantors,’ it added.

For this reason, the FCA  has ‘censored’ the firm. 

The move acts as a warning to raise awareness of regulatory standards and principles in the wider market, with the aim of changing the behaviour of the censored company and deterring others from engaging in similar activities. 

‘The FCA would have imposed a fine of £72,900,000, however Amigo demonstrated that this would cause it serious financial hardship,’ the regulator explained.

‘A fine would also have threatened Amigo’s ability to meet its commitments to a High Court-sanctioned scheme of arrangement, which aims to pay redress to customers.’

In May last year, a compensation scheme was finally approved by a High Court, but this was conditional on Amigo completing a successful equity raise by May 2023 and restarting lending in February.

It did return to lending in October ‘under close scrutiny’ from the FCA, but cautioned that the cost of living crisis had made that more difficult as customers often could not afford repayments.

However, last month it said it had so far failed to find a big investor willing to back it.

It will be forced to wind-down the business if it does not find one by May, leaving mis-sold customers with less compensation than they otherwise would have received. 

Amigo shares rose 27 per cent to 3.35p in afternoon trading on Tuesday.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: ‘Amigo failed to assess properly the affordability of its lending, especially to vulnerable consumers, as our rules required. 

‘This led to lending that was unaffordable for some and meant guarantors had to step in. 

‘It also had the effect of prioritising the firm’s commercial interests over the obligation to comply with the rules and safeguard customers from unaffordable loans.’

Amigo chief executive, Danny Malone, said the end of the investigation allowed the company to draw a line under these ‘historic issues’ as it looked for capital required to stay afloat.

‘I would like to apologise again to any customers impacted for the past failings in lending practises that occurred during the period 2018-2020,’ he added.

‘As a new Board and management team, we fully accept the lessons that needed to be learnt for the future and our focus remains on rebuilding a business that delivers better outcomes for customers, backed by stronger lending controls and a better culture.’