Amigo to close & Scheme goes into Fallback – implications for customers

August 2023 – the first “UPHOLD” decisions are being received.

Comments on this article are now closed.

Please see the comments below the main Amigo Claims page to see what is happening.

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On 23 March 2023 Amigo announced that it has been unable to raise the equity it needed to continue in business. This means that the Scheme of Arrangement currently underway will change into the “Fallback option” and there will be less money to pay cash refunds.

Amigo Loans Ltd, the trading subsidiary, will immediately stop lending and go into an orderly wind down. At the end of this, it will be liquidated.

This article looks at the implications for Amigo customers – those who have claims into the Scheme and those with a current loan.

The Amigo Scheme so far

Amigo’s affordability checks were so poor that in 2020 the Financial Ombudsman was upholding over 80% of complaints about the affordability of its loans. Amigo had to set up a Scheme of Arrangement to limit the amount paid in refunds to customers given unaffordable loans.

Amigo’s first scheme was rejected by the High Court after the FCA said it benefited shareholders too much and wasn’t fair to customers.

Then Amigo proposed a second Scheme. This included raising equity from shareholders and contributing £15m from this into the Scheme. This would increase the cash refunds to customers. This second Scheme was approved in May 2022.

The six months for customers to submit claims ended in November.  These claims are currently being decided and few people have yet been told if theirs has been upheld or rejected.

Scheme changes to the Fallback option

The Scheme says that if Amigo is unable to raise the £15m money by 26 May 2023, the Scheme changes into the Fallback option which involves a wind-down of the business.

The Scheme itself continues in this Fallback option.

What is changing – lower cash refunds

Without the £15m, in the Fallback option now there will be less money available for cash refunds.

When the Scheme was proposed in early 2021, Amigo said it expected people would get paid 41p in the £. So if the refund on your Amigo loans was calculated at £1000, that means you would get £410.

That never looked likely to me. Amigo always refused to say how it calculated the number and crucially how many complaints it expected to receive.

So I wasn’t surprised when the last Scheme Supervisor’s Report said in November that 210,000 claims had been received. The reports said that was a lot more than Amigo had expected. With more claims and the same amount of money to divide, the estimate of refunds had halved to 20p in the £.

That November report also contained a new estimate of what may be paid in the Fallback option – 17p in the £. This is the best indication we have of what may now be paid out andnit is what Amigo is curently saying in the FAQs on the Scheme website.

Timescale for payouts

It was expected that a first, larger payment may be made in September followed by a smaller payment in November 2023 to pay out the remaining money.

UPDATE  The Scheme website has now been changed to say:

The initial payment will be unaffected but (under the fallback solution) the final payment will be delayed until approximately May 2024 as opposed to November 2023 (after the business has been liquidated).

What isn’t changing – everything else

Apart from the amount of the cash refund, the rest of the Scheme remains the same:

• customers with a current loan will still be able to get their balance reduced or cleared;
• credit records should still be cleaned if there are any negative marks for loans that are upheld as unaffordable.

Loans continue to exist

Today’s announcement doesn’t change anything about the current loans. The loan still exists, it is still a guarantor loan.

If you are making the normal monthly payments and can afford this, then that is probably your best option.

For people struggling to make normal repayments:

• if you have made a claim to the Scheme, you should consider asking Amigo for “equitable set off”. See Amigo now lets some people pause paying which looks at the pros and cons of this;
• if you haven’t made a claim to the Scheme it is now too late to do this. Talk to a debt adviser about this – see this list.

At some point in the wind-down of the company, it is likely that most or all of the remaining loan book will be sold to a debt collector:

• for loans where there has been a claim to the scheme this is very unlikely to happen before the claim has been decided;
• loans that are sold continue to be guarantor loans
• most debt collectors are a lot nicer to deal with than Amigo, so people shouldn’t worry about this.

If your loan has already been sold, then the announcement today makes no difference to you.

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