Loans firm Amigo let off £73m fine

Struggling high-cost lender Amigo has been let off a £73m fine because it couldn't afford to pay it.

The Financial Conduct Authority said the firm failed to carry out proper affordability checks on borrowers, leaving many with little chance of being able to repay their loans.

The mis-selling led to Amigo facing a huge compensation bill, which almost caused the company to go bust.

The FCA said a fine would have caused Amigo "serious financial hardship".

So it publicly censured the firm instead.

Amigo said it fully accepted "the lessons that needed to be learnt".

The FCA said a fine would have hit Amigo's ability to pay out millions of pounds in compensation to customers under a High Court-sanctioned scheme of arrangement, even though "the serious failings in this case warrant a substantial financial penalty".

"The size of the fine demonstrates the huge scale of the Amigo mis-selling," said debt expert Sara Williams, who writes the Debt Camel blog.

She said the firm gave large, expensive loans to people in financial difficulty with few checks. "It raises questions about how the FCA has handled this - why did FCA supervision fail the Amigo customers so badly?"

Other smaller guarantor lenders have had similar problems, meaning "the FCA should reconsider whether these loans are just too dangerous and should be banned," she said.

Amigo offered loans to people with poor credit records, charging them an interest rate of up to 49.9% and making them use friends and family as guarantors for the loans.

But it ended up with thousands of complaints from borrowers who said the company had mis-sold them loans.

The FCA said that between November 2018 and March 2020, Amigo failed to have proper processes in place to assess the affordability of borrowers and those who acted as their guarantors.

That led to a high risk of consumer harm, both to borrowers and guarantors, the FCA said.

"Amigo failed to assess properly the affordability of its lending, especially to vulnerable consumers," said Mark Steward, the FCA's executive director of enforcement and market oversight.

That meant guarantors were asked to step in and make payments to assist struggling borrowers in one in four of Amigo's loans.

The watchdog said that Amigo effectively prioritised its own commercial interests above its obligation to comply with the rules and safeguard customers from unaffordable loans.

It also said that Amigo failed to maintain adequate records leaving it unable to provide satisfactory responses to questions.

The investigation was also hampered by Amigo negligently deleting the email accounts of former staff members.

The company stopped lending in 2020 and compensation claims totalling around £345m looked set to cripple the firm until it negotiated reduced redress last year, approved by the High Court in May.

Amigo said the closure of the FCA's investigation marked an "important milestone" for the company as it looks to secure its future.

"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," said Danny Malone, chief executive of Amigo.

It began lending again in October 2022 but is now seeking investors to inject fresh cash totalling £45m into the business to allow it to continue lending.

Under the High Court-approved scheme of arrangement it has until 26 May to raise the cash, or the business will be wound down.

Amigo shares climbed 25% on the news that it had avoided the fine, but still languish at 3.27p, compared to the almost 300p level they traded at five years ago.