This article relates to Amigo’s first Scheme, which was rejected in May 2021.
See Amigo’s second Scheme for the latest news.
When Amigo announced it was proposing a Scheme of Arrangement in December, it said:
Amigo continues to explore alternative options but it is likely the alternative options would result in those with Redress Claims receiving considerably lower amounts (if any at all) than they would under the Scheme.
But that isn’t correct for one large group of borrowers who would be significantly better off if Amigo went into administration now, rather than into a Scheme when it is set up.
And there are some other groups who may also not be better off in a Scheme.
This article looks at who could be worse off in a Scheme and how Amigo could correct this.
Contents
Most borrowers with a current loan would be better off in administration now
In administration, if a customer has their Claim for a refund upheld and they also have an outstanding balance then their balance is reduced by the refund and they will get a small percentage of the cash refund amount. And if they have made payments after the Scheme started, these payments are refunded in full.
In the Amigo Scheme, exactly the same will apply: a balance reduction, a small amount of the cash refund amount and payments made since the start of the Scheme repaid in full.
Amigo expects the “small percentage to be larger in the case of the Scheme than administration – that may well be correct.
However the big difference is in the potential start date of the Scheme.
Amigo could go into administration tomorrow. So all future payments will be repaid in full to a customer whose complaint is upheld.
I expect the Scheme will take three to six months to set up. During that time, most borrowers will be making payments to Amigo and their balance will be dropping.
A borrower whose balance is already less than their refund amount, or drops to being less in the next few months, will lose out by making all these extra months payments that they will not get back in full.
A worked example
Ms A borrowed £4000 over three years from Amigo. She has made 24 monthly payments of £195 – a total of £4,480.
Let’s assume she would have her Claim upheld in a Scheme and in administration. And ignore statutory interest which will be very small.
If Amigo goes into administration now Ms A would get her balance wiped and a very low amount, possibly zero, of the £480 back in cash. But if she carries on paying while the Administration goes through she will get all her payments from now back in full.
If instead Amigo goes into a scheme in 4 months time, she will have paid £5460 by then. She would have her balance wiped and be assessed as having a refund of £1460 because of the extra payments she has made. But she will only get a small amount of this back. Let us say this is 10% – I think that is extremely optimistic, it’s more likely to be 5%, but let’s say 10% for this calculation. Ms A would get a cash refund of £146 but she will get 4 months fewer monthly payments back in full as the Scheme started later, so she will have lost £780 there.
Overall Ms A will be £634 worse off under the Scheme.
If the Scheme takes longer to set up or pays out less than 10% she will lose even more money.
This will affect tens of thousands of people
When I worked out some numbers for likely refunds, my estimate was that:
Of the 150,000 people with a current loan, roughly one-third of the ones who only had one loan and who hadn’t taken a Covid-19 payment break would still owe a balance and two-thirds wouldn’t after redress.
Customers with two or more loans are even more likely to get caught in this trap as their refunds may be higher.
Not all of these customers will have a complaint upheld of course – but a very large number should.
So I think there are likely to be tens of thousands of borrowers who will be better off if Amigo goes into administration now, rather than into a Scheme.
All guarantors making payments would be better off in administration now
A similar argument applies to guarantors who are currently making payments who have their Claim upheld. They will not have any balance reduction as if their claim is upheld they do not owe a balance at all. Instead they will receive all their refund in cash and in the Scheme that will be paid at the very low pence in the pound rate.
But they will have a refund in full of all payments they have made since the Scheme started. And in administration they will get a refund of all the payments made since the start of administration, which can be several months more refunds if administration is now.
Some other customers may be better off in administration
There are three other groups of customers who may potentially be better off in administration, but these are less certain as it depends on how Amigo will uphold complaints and assess the redress.
- Anyone with a balance owed will be better off in administration if their claim is rejected in the Scheme but upheld in administration. In administration the administrators normally try to replicate FOS decision making as far as they can – Amigo has not yet confirmed if they expect to uphold the same large number of Claims that FOS does.
- Anyone with a balance owed will be better off in administration if Amigo uses a redress calculation that does not match FOS’s eg by applying a deduction for unpaid interested.
UPDATE In March Amigo has said it will still be applying this unfair deduction. - Any borrower with default or a missed payment on their credit record will benefit from having that removed. This may be of far more value than a small cash refund… so if more Claims are upheld in administration more people may benefit from this.
UPDATE In March the FCA said Amigo was not following the FOS approach to determining claims. So a lot of good claims may be rejected and those customers would be better off in administration if they have open loans or a credit record that need to be corrected.
Amigo can put this right simply – if it wants to
The Scheme date problem can be easily resolved by Amigo in one of three ways:
- it can stop collecting repayments now from customers until claims have been determined in the Scheme;
- it can stop collecting payments now from customers who have made a complaint; or
- it can set up the Scheme so that customers whose claim is upheld get a full refund of payments paid from now, not from the start date of the Scheme.
But doing any of these will cost Amigo a lot of money.
In the recent half-year results Amigio received £92m in loan repayments in six months. That was depressed by Covid-19 payment holidays, most of which will have unwound by now so this should increase over the next 6 months, although there will be some reduction as some loans are repaid. It seems reasonable to expect Amigo to be earning at least £15m a month for the next few months from loan repayments.
A very large number of people with current balances may win Claims. If that is 50% and the Scheme takes four months to set up, Amigo will gain 30 million from having collected the extra four months payments and not refunded them.
And of course these customers will lose 30 million. This is more than the money Amigo is proposing to put into the pot for cash redress payments!
At the moment Amigo is proposing to profit from this period before the Scheme is set up and the winners will be the Amigo bondholders and shareholders.
The FCA should make up its mind quickly!
The scale of the amount customers may lose because of the delay in setting up the Scheme suggests that the FCA should make up its mind quickly on whether the Scheme should go ahead. Because if it decides No, then it is better for administration to start as soon as possible.
Further reading:
More articles about Amigo
Comments are now closed on this article.
Mal says
And how many of these companies have provided a good return when they are in administration.
Sunny for example 1 pence in the pound. 1/100.
The government needs to step in and protect the customers but currently it’s a wish to far and the FCA are asking Amigo to lend but also needs to be seen to hold them to account.
If all these companies go into administration who is left to lender to people that need it.
Sara (Debt Camel) says
I agree there should be FSCS protection for customers.
But that doesn’t change the situation that tens of thousands of Amigo customers will be a LOT better off if Amigo go into administration now rather than a Scheme in 3-6 months time. Amigo is simply wrong to say customers will be better off in a Scheme – many won’t.
the FCA are asking Amigo to lend
No they aren’t. Amigo is hoping they will be allowed to start lending, that isn’t the same at all.
If all these companies go into administration who is left to lender to people that need it.
Unaffordable lending doesn’t help the customer.
Better lenders will be able to improve their affordability assessments and payout refunds where there were previous errors.
But Amigo made so many errors that may not be possible. It is one of the worst. It has a VERY poor record of checking affordability hence its very high uphold rate at FOS. This is not a firm worth trying to save!
Mal says
FCA asked Amigo to continue lending to critical frontline workers.
Sara (Debt Camel) says
Really? Or did Amigo tell The FCA it was going to do this and the FCA didn’t object? That isn’t the same at all…
The idea that the regulator would ask any lender, let alone a bad credit lender, to loan to a group of people seems pretty unlikely.
Keenan says
This is hear say. You never give facts, just your opinion and estimates. What do you base your estimates on? Opinion.
Sara (Debt Camel) says
Hearsay is when you report what someone else has said.
Of course I am giving my opinion – but I use available numbers wherever possible. If Amigo wasn’t so secretive about numbers of complaints, its uphold rate, its average redress paid etc than it would be possible to give more accurate estimates.
If Amigo cares to provide me with any evidence that the FCA asked them to continue lending to key workers then I will happily withdraw my remark.
Colin marritt says
Hi sarah, dont you think that advice your giving about being better of in administration is a bit wrong? Your basing your calculations on if scheme takes 6months to go threw and if Amigo goes into administration today. Administration is last resort so either way this wont be happening for at least 6 months so people will still have to pay there loans for this time. So how can they be better off then? It works out exactly the same.
Sara (Debt Camel) says
And there is no reason why Amigo cannot go into administration today. My point is that the FCA needs to look at the cost to these customers of delaying making a decision on the Scheme.
Ben says
Your advice highlights the benefit to customers of administration right now, this isn’t going to happen as the company has published how it sees it can continue as a going concern. The FCA still has time to make decision prior to the creditors vote. As you will clearly be aware this is a legal process that the company is going down and the timescales are also published. Your advice does draw it’s weight from comparison to a situation that won’t happen tomorrow and therefore not telling the reader of such an unlikely event is misleading.
Whilst some good factual points are being raised I feel this doesn’t help the reader rather than misguide. I do feel you should highlight this point.
Sara (Debt Camel) says
My point is that the FCA could make up its mind quicker and administration could be sooner – that was the conclusion of the article. Which would be of benefit to the customers I identified.
Ben says
Appreciate your point but quoting a scenario based on an extremely unlikely event is wrong. Using the word “now” in the article rather than “sooner” gives a very different take on what you are trying to put across and I don’t feel it gives the reader a balanced perspective to assist in their decision making if they are considering which way to vote.
Maya says
Yeah sunny is ridiculous with the redress.
Scott sergeant says
I have been made an offer from amigo who contacted the fos and said they would give all money back to my guarantor and remove my credit file, this was done before the 21 Dec deadline. They have removed my guarantor on the 6th Jan 2021 but have not repayed my guarantor, any thoughts.
Sara (Debt Camel) says
I hope your guarantor will get the repayment in full then. See https://debtcamel.co.uk/amigo-delay-paying-refunds-disp-waiver/
Samuel says
Well I’m shocked as I received all my interest back in November.
The loan was paid in full in October and put claim in straight away and was paid out 5 weeks later.
Hope you guys get the same treatment.
Leanne says
I had my interest deducted on my loans after I made a claim and still have £700 left to pay.
Do I need to ask for a further review in order for my loan to be classed for redress? Sorry if I’m not understanding properly.
Sara (Debt Camel) says
Were all the loans you had upheld?
C says
The below was released today.
How on earth can they refuse to pay after withdrawing for the DISP waiver? Are they openly admitting they are breaking regulations but dont care?
Also some unsurprising news regarding the amount of complaints…therecwas more than amigo reported last year
Regarding the handling and payment of claims relating to current and outstanding customer redress issues, as announced in the RNS dated 21 December 2020, Amigo stopped the payment of all such claims, except for certain limited cases described in that RNS. Following discussions with the FCA, Amigo withdrew its DISP waiver application to suspend complaint handling and Amigo (as set out in the RNS dated 21 December 2020) has been continuing to review and process but not to pay complaints, again except for those certain limited cases described in that RNS.
James says
The law around administration is very simple. Secured creditors (banks and bondholders) must receive payment in full before unsecured creditors (customers with a complaint) get a single penny. This means that, as the company has said, if the Scheme is rejected and the company goes into administration then customers will legally receive £0 because there will simply be no money left to pay them. Please do correct me if this analysis, rooted in the Companies Act 2006, is incorrect.
Sara (Debt Camel) says
Borrowers who have a current loan have the right of set-off of the redress amount against their balance. And if they have made payments after administration starts, those payments are refunded in full.
Adam Shah says
Under the SOA,
Borrowers who have a current loan have the right of set-off of the redress amount against their balance and if the redress is bigger than the loan amout, it will be paid from the the pot.
And
Customers who had loan with Amigo get a chance to apply for redress and opportunity to get some refund from the proposed pot.
So , is it not better to go for SOA where everyone can get benefited .
Correct me if I’m wrong
Sara (Debt Camel) says
If you would like to read the article above, my point is that there are tens of thousands of current borrowers who would be likely to be better off if Amigo went into administration now, rather than a Scheme in several months time.
And a previous article makes the point that the payouts from the pot are likely to be very small: https://debtcamel.co.uk/amigo-scheme-estimated-numbers-not-good/. So for a borrower facing losing from £300-£1600 points from the delay on the Scheme, the chance of a small refund from the pot is no consolation.
Deb says
The FCA released a statement regarding Wonga going into Administration: “The FCA will continue to supervise Wonga once it is in administration and is in close contact with the proposed administrators with regard to the fair treatment of customers.”
“Customers should continue to make any outstanding payments in the normal way. All existing agreements remain in place and will not be affected by the proposed administration. However, the firm is no longer able to issue new loans.”
Sara (Debt Camel) says
I’m not sure why you have posted this here? If you have a Wonga debt, please see https://debtcamel.co.uk/wonga-has-stopped-issuing-loans/.
The FCA’s comment is the standard one that loans remain in existence after administration.
Whether someone should continue to make payments depends on whether they can afford this. The FCA would not suggest a customer should make payments they cannot afford.
The standard debt advice in administration is given here by StepChange https://www.stepchange.org/brighthouse.aspx
Jason says
Hi Sara
It would be great to get some advice on how people should vote. How much redress are people likely to get in both scenarios? I know there is a tendency to want to punish amigo but what would actually be best for customers? What do you think will happen?
Sara (Debt Camel) says
I think we need to know a LOT more about what Amigo are proposing.
Do you have a current loan? Have you already made a complaint?
Jay says
Hey Sara ,
I have a current ongoing loan with amigo. I tried to get them via [a claim company] but they got away. I still have around £2.8k outstanding out of £4K I lent from them. It’s mental at the amount of interest going out. How do I make the redress claim and what is the procedure to do so. Could you please advise. And can anyone make a claim who has loan from amigo. Please confirm. Thank you
Sara (Debt Camel) says
what was result of the claim that was made? how long ago was that?
Jay says
Hey Sara ,
They got back to me and said all lending procedures were followed. And that really disappointed me as they took their time to investigate and I told them well I knew that as I signed the papers along with my guarantor. But like I asked in my previous post is there anyway to claim against them before March or just wait till March when the hearing is due. Also do I contact to stop paying interest or just keep it as it is.
Sara (Debt Camel) says
when did you get the reply from Amigo?
Are the curent payments affordable? Have your finances been affected by covid-19?
What is your guarantor’s current financial position? Have their finances been affected by covid-19?
What was your guarantor’s financial position at the time the loan was taken out – could they really have made all the payments to your loan and still been able to pay all theor own bills, debts and normal everyday living expenses?
Jay says
I got an email and sms from Amigo about the All scheme LTD. They gave me 6 month break on my payments but again due to lockdown my situation is not looking good. I have informed them but they are unable to extend the break my guarantor’s situation is fine as she works from home and is a home owner. They could still afford the payments but i wouldn’t want them to. What do you suggest i do.
Sara (Debt Camel) says
It isn’t definite the Scheme will go ahead so I suggest not waiting to find out but send in a complaint now. Use the template here https://debtcamel.co.uk/how-to-complain-guarantor-loan/. This doesn’t solve your problem about not being able to make the current repayments, but further down the line it could be a solution with your guarantor being released and you being able to make an affordable payments arrangement.
What is your income at the moment?
Just because your guarantor is a homeowner doesn’t mean she could have afforded to make all the payments on your loan and still pay all her other debts, mortgage, bills and living costs.
Jay says
Thank you for getting back to me so quickly. My income is around 18k mark as i was made redundant last year and i am working part time in a Takeaway restaurant. I dont want my guarantor to pay any penny as she trusted me to pay this off and she has done every part in her power to get me this loan. She is still currently working from home and gets her full income and Amigo keep on threatening me if i can’t pay they will have to ask my Guarantor to step in for me as they are ultimately responsible. Would making a complain eliminate issues of me repaying with High interest and also releasing my Guarantor. Its just during taking the loan out i was at a really steady and good income around £40k and COVID has severely disrupted life and chances of survival. Thank you sara
Sara (Debt Camel) says
If you win a complaint your guarantor is released. But if you don’t pay after making a complaint Amigo will just go after your guarantor.
So if you really can’t pay – and getting behind with rent and other bills would be foolish – you have to talk to your guarantor about this.
Your guarantor could cancel their direct debit so Amigo can’t take the money from them. Amigo will get cross but this won’t affect your guarantor’s credit record – if she looks she will see the Amigo loan is not on there. Amigo may threaten court but they shouldn’t do this and no-one seems to have this problem in practice.
The problem with this strategy is if you do not win your complaint. At that point Amigo will be asking the guarantor to pay the arrears and may go to court. That is a long way off but it may happen – you seem to think the loan was affordable when you took it out and that is what matters for an affordabilty complaint, not whether it is affordable now.
Do you have a lot of other debts? I am not sure why you ever took an Amigo loan if you were on good money?
Jay says
Hey Sara ,
I am going to send the complaint letter tomorrow and also inform my guarantor about this. This is the only debt I have along with my credit card but nothing else. But you guess once I make a complaint I should stop paying or continue paying the interest.
Sara (Debt Camel) says
I can’t say what you should do. This is a difficult choice for you – there may be no simple answer, see my previous reply.
Other options apart from not paying may include only making token £1 payment to the credit card, asking for charges to be stopped on any overdraft and asking Amigo to agree a lower amount. I would not suggest getting behind with prioirty bills. I think you would find it ueful to talk to a debt adviser about your situation and priorities – phone National Debtline on 0808 808 4000.
Yiou haven’t answer my question about what the previous compolaint was and when you got a response from Amigo.
I don’t know why you took the loan out if you were on a good salary. If you had a bad credit record that is often indicative of a big financial problem in which case the loan may be decided to be unaffordable for you even if you were on a good salary! This matters because if you eventually lose your complaint the interest is not removed and if you have not been paying your guarantor will be chased.
And you haven’t said more about your guarantor. If your guarantor could not have afforded to make all the payments and still pay their own debts, bills and living expenses they that can complain that the loan was not affordable for them – that gives them two chances of being released from the guarantee – if you win your complaint or they win theirs.
Jay says
Hey Sara ,
Complain made was not via Amigo. It was by Blue panda finance for PPI LEVI claims. Yes due to few financial matters I had to take the loan and urgent requirement. I will be call debt helpine to get further info.
Thank you
Hesham Abdo says
Amigo has tweeted back to this:
“ Hi DebtCamel, this blog post is misleading customers, as an administration will provide no ability for an Amigo customer who had a historic loan to get any payment for a valid complaint they might have.”
Sara (Debt Camel) says
The article is quite clear about which customers I am referring to. It is the current borrowers and guarantors making payments that will lose out if a Scheme is set up in May compared to administration now.
Amigo can remove this detriment in several ways, but they will all cost it money so I guess Amigo doesn’t fancy helping these customers.
I have offered to put in more accurate numbers of customers affected if Amigo gives me them.
Jimmy says
Hi Sara,
I made a complaint in 2 years ago this month and I’m wondering will that be looked at again or how all this is working? I haven’t paid since back then. I never heard back from the ombudsman man after amigo had replied saying they didn’t agree. My guarantor at the time has not heard anything from them since they made there complaint and sent it to FOS. Would they have been removed. Or would this have been made clear.
Thanks
Sara (Debt Camel) says
SO the Ombudsman upheld your case but then Amigo said No?
I’m sorry I really can’t guess what has happened! Anything you do at the moment may just prod a sleeping lion…
Rhi says
I don’t understand anything about this I received a email from amigo about a scheme but have no clue what I got to do? I have a loan with them have 7k left so Do I make a claim or do I leave it? The interest is sky high and if I don’t make a claim if they go into administration do my loan get wiped off?
Sara (Debt Camel) says
The regulator’s definition of affordable is you have to be able to make the loan repayments and pay all your other debts, bills and living expenses.
So has this loan been causing you difficulty from very early on? Have you found yourself borrowing more eg on a card or your overdraft? or getting behind with rent, council tax or utility bills?
If it has, then you should make a complaint that the loan is unaffordable. There is no need to wait for the Scheme to be set up – we don’t know how long that will be or if it will actually happen. If you feel the loan is unaffordable because it leaves you too short each month for all your other expenses, then you can send in a complaint now – read https://debtcamel.co.uk/how-to-complain-guarantor-loan/ which has a simple template to use.
Or you can decide to wait and send in a Claim to the Scheme or to the administrators if Amigo goes under.
If you make a complaint and it is upheld, you only have to repay what you borrowed, no interest. So if you borrowed 9k and have so far paid 6k, your balance would be cut to 3k, your guarantor would be released and you could arrange to pay the 3k left at a lower more affordable rate with getting a default on your credit record.
This applies if Amigo goes into a Scheme or into administration! There are only two differences:
1) the question about whether your complaint will be upheld. In a Scheme Amigo will make this decision and they haven’t said anything about how they will do this. They have made some very poor decisions in the past so they are going to have to set out a lot of details so you could feel confident that would uphold your complaint. In administration this is done by the administrators who normally try to follow Ombudsman approach, and the ombudsman is upholding a lot more than 80% of Amigo complaints!
2) If your refund is huge – more than 7k in interest – then in the Scheme you would get back a very small percentage of the extra over 7k – possibly 5% but Amigo won’t give any numbers about this. In administration you wouldn’t get anything. Most people with current loans will care less about this, their main aim is to get their balance down and their guarantor released.
Steve says
Hi Sara I had a loan and managed to pay it all back before all covid hit. I got a text from amigo (I thought it ws spam first!) then i googled and found your website. It looks from this artical that I am BETTER OFF if the scheme goes ahaed? so should I vote YES to the scheme then?
Sara (Debt Camel) says
We will know more about the Scheme in a few weeks time.
It isn’t clear that there are only two options – this Scheme or administration. There are aother ways to structure a Scheme that would be massively fairer to the customers who at the moment are just being thrown some scraps.
Richard says
Are you not mis-advising people on here!? You’re saying if Amigo go into administration customers are better off, I heard that that’s not true and Amigo said as much on a radio interview. If they go into administration customers would get NOTHING… Why are you ‘promoting’ otherwise? Aren’t you supposed to be helping us customers, I want to to see the best chance for me to get something back, regardless how little? Surely if Amigo are saying we’ll get nothing if they go into administration, we should listen to this? They would know the status of their current affairs?? Thanks
Sara (Debt Camel) says
Do you have a current Amigo loan?
How many Amigo loans did you have?
How long ago were the loans?
Samantha says
I have a loan with Amigo, with just over £1000 left to pay in installments of £85 per month – obviously, the amount I’ll pay is way more. I believe I have around a year of paying left.
I’m continuing to pay the loan, as I’m really trying to build my credit score back up and don’t want anything affecting me at all. I emailed Amigo a few months ago asking them to look into the loan they offered me and the interest rates given and if that was taking into account when looking to see if I could afford it,.
How will this work out for me? If anything happens before my loan is over, will I just have to stop making payments? Will the loan be wiped off? I have technically paid back the entire loan now, and its just interest I’m now paying.
Would I be due any of that interest payments back, or how will things work out compared to the differnt options?
Sara (Debt Camel) says
If Amigo go into the Scheme or if they go bust and into administration, your claim can be considered. If you have it upheld, the balance will be wiped as you have already paid more than you have borrowed. In the Scheme you would get a tiny bit of the extra interest back, perhaps only 5%.
From here on, you really want to pay as little as possible, as that maximises your balance write off and minimises the cash refund which you will only get a very small amount of.
But stopping paying will hurt your credit record in the short-term. If you win the complaint though all negative marks would be removed.
So you have to balance up the damage – possibly short-term – to your credit record against the money you will be saving.
And the other problem is, will Amigo uphold your complaint? In administration, the administrators normally try to follow roughly what the ombudsman would have done. But at the moment we don’t know how Amigo will decide these complaints. We should know more next week.
Sara (Debt Camel) says
Comment are now closed here.
Please leave any on the more recent article: https://debtcamel.co.uk/amigo-scheme-reject-claims/