When Amigo announced in December 2020 that it was seeking a Scheme of Arrangement to cap the amount it has to pay to customers owed refunds for unaffordable lending, it said:
To ensure equal treatment of customers with Redress Claims, Amigo will stop the ongoing payment of all Redress Claims, except for those cases where the Redress Claims result from: (i) reviewed and upheld complaints where a Final Response Letter has been issued to the customer, dated before 21 December 2020; or (ii) where the complaint has been referred to the Financial Ombudsman Service (“FOS”) and it has upheld that complaint and issued a final decision letter to that effect, dated before 21 December 2020.
An application has been made to Amigo’s regulator, the Financial Conduct Authority (“FCA”), for a DISP waiver to suspend complaint handling as the proposed Scheme will address those complaints. The FCA’s response is awaited and, in the meantime, complaint handling will continue.
Since then very few refund payments have been made.
I don’t know why FOS and the FCA are allowing this happen. What has happened to the requested DISP waiver?
“A Final Response Letter” – what exactly does this mean?
Many customers are unclear if they have had a “Final Response Letter” if Amigo has agreed their loans were unaffordable but has not yet issued an email with calculations.
Some of these complaints were upheld directly by Amigo after a complaint by a borrower or a guarantor. Others resulted from a FOS adjudicator decision (this is not a FOS “final decision” – that comes from the second “ombudsman” stage) which Amigo has accepted.
I think there are several thousand customers in this situation. Some of them have been waiting for payment of their upheld complaints since August and September.
The largest group of these are cases where the guarantor made some payments. Amigo has a genuinely difficult problem with a small number of these complaints, where both the borrower and the guarantor were claiming the refund. But in most cases the borrower and the guarantor were agreed who should be paid and whether the borrower’s account should be adjusted. There has been no good reason for Amigo to not pay out these refunds.
A DISP waiver?
The DISP rules are the FCA’s complaint handling regulations. They apply to all authorised firms, from the largest insurance company to a tiny IFA. So this request by Amigo for a DISP waiver is highly unusual. It seems an odd thing to ask for when you want your regulator to agree to your proposed Scheme of Arrangement going forward – somewhere between pushy and desperate.
In the ICL (the Money Shop) Scheme, there was no DISP waiver. Despite ICL being in significant financial difficulty, it carried on accepting FOS adjudicator decisions and paying out refunds until the Scheme started. That would seem to be the responsible approach to take, especially as Schemes can take many months to set up.
What has happened to this request to the FCA for waiver? FOS must have objected strongly to it. The FCA may want to make sure a firm asking for a waiver would pass a solvency test – I don’t know if Amigo thinks it would.
If the FCA has rejected this request, or if Amigo has withdrawn it, this needs to be announced and Amigo needs to start complying with the DISP rules: issuing decisions on the new complaints that are arriving; supplying case records to FOS and co-operating in FOS investigations; accepting FOS adjudicator decisions; and paying out where loans have been determined to be unaffordable.
A standstill agreement has to be fair
Amigo is arguing that it is fair to all customers for it to stop paying out. That seems hard to justify – many of these are cases where Amigo has deliberately delayed paying them, despite other customers being paid out at the same time. Where is the equity there?
A “standstill agreement” can be set up before a Scheme of Arrangement is agreed. This allows all parties some breathing space to consider the proposed plan.
But such a standstill agreement has to be two-way: if Amigo wants to stop paying redress, it can’t at the same time be pressuring borrowers who have open complaints to carry on making loan payments. Amigo’s request for a DISP waiver seems to only benefit it and its shareholders, not the customers.
UPDATE on 25 January 2021, Amigo said that it has withdrawn its request for a DISP waiver – but it is not going to be paying out on new FOS decisions. This sounds like a breach of DISP to me.
Comments on this article are now closed.
Please join in the discussion on the more recent article: Amigo’s Scheme – key points to think about