On 4 March 2020 the founder and majority shareholder of Amigo, James Benamor, resigned from the board which he had only rejoined in December.
In the evening he published a blog saying that the company was “committing slow motion suicide”.
Benamor said the board needed to choose between challenging recent FOS decisions on affordability complaints in court by Judicial Review or accept that “almost all their loans had been made irresponsibly”, stop lending and go into administration.
When he came back onto the board, he says he personally audited the most recently lent and refunded loans. And he found that:
Amigo had, for six months, been lending almost entirely in a way that matched their own complaints team’s definition of ‘irresponsible’.
He described the company as being a:
cash cow for consultants, lawyers and suits, all of whom had an interest in keeping the gravy train running for as long as possible, but no interest in the company being honest with shareholders or customers about the situation it was in.
and said he could no longer remain on the board.
Amigo has today issued a Response to statement by James Benamor disagreeing with much of what Benamor said:
Mr Benamor’s statement contains several material inaccuracies and is fundamentally incorrect in a number of respects. Amigo does not accept Mr Benamor’s account of events…
The Company monitors its loan book regularly and has concluded, as part of its Q3 review process, that it does not have a systemic problem.
Background – Amigo’s complaints in 2019
Back in 2018, very few complaints against Amigo were upheld at the Ombudsman, only 18%.
Then customers started to make affordability complaints – saying that the borrower could not afford the loan or the guarantor could not afford the loan. and that Amigo had failed to make proper checks that they could.
A loan is only affordable if you can repay it on time, without hardship, having to borrow more money or get behind with essential bills. The Financial Ombudsman explains how it looks at affordability complaints about any product here.
The FCA’s rules say that a guarantor loan has to be affordable for both the borrower and the guarantor:
- if the Financial Ombudsman (FOS) agrees with a borrower’s complaint that the loan was not affordable, then interest is removed from the balance or refunded if the loan has been repaid;
- if FOS agrees with a guarantor’s complaint, then the guarantor is released from the loan and any payments the guarantor has made are refunded.
By the middle of 2019, Amigo was losing almost all affordability complaints at FOS. FOS published two decisions against Amigo which went into a lot of detail: one by a borrower and one by a guarantor.
Amigo then settled a lot of the outstanding FOS complaints and starting making what looked like reasonable decisions on new complaints in line with what FOS would be likely to decide. And it was also responding to the new complaints within the 8 weeks that the FCA says it should.
In August 2019, when Amigo posted its results for April-June it said:
We have seen an increase in the number found in favour of the customer by the Financial Ombudsman and have updated the way we investigate these cases…New customer lending is being prioritised over relending to existing customers. We have further enhanced and tightened our credit policy.
But by November when the next quarter’s result were out, Amigo had apparently decided that it was paying out too much in compensation, saying:
With the FOS backlog unwinding, we expect to revert to more normalised, lower uphold rates and a reduced average redress.
As I said at the time, that was a rather surprising statement seeing as Amigo had simply been following the FOS decisions, which is what the FCA’s DISP rules say it should do.
From that point, Amigo got much slower about responding to complaints. It asked for extra weeks, first taking 10, then 12 and now often 14 or more weeks. And it also started rejecting many complaints, even very strong ones.
FOS upheld a massive 90% of guarantor loan complaints from October-December 2019. These were not just against Amigo but other guarantor lenders as well.
Amigo published its results for Oct-Dec 2019 on 27 February 2020.
What happens next?
The FCA is likely to be interested in two main points:
- whether Benamor is correct that current Amigo lending is out of line with FOS decisions on affordability;
- how large Amigo’s potential redress liability is.
If you are a customer who hasn’t yet complained to Amigo read these articles and see if you were given unaffordable loans: