On 20 July 2020 Amigo published its results for the year ending 31 March 2020.
The financial headlines:
- Amigo made a loss after tax for 2019-20 of £27.2m. For the previous year this had been a profit of £88.6m;
- no guidance on financial performance for 2020-21 was given because it is too early to assess the impact of Covid-19;
- it had cash in the bank of over £135m at 30 June 2020.
I am mainly interested in details of how it is handling complaints. Amigo has recorded a complaints cost of £126.8m and a complaints provision of £117.5m as at the end of the financial year. But they don’t give actual complaint numbers. They say:
we saw the level of complaints begin to increase from Q2 onwards. After the year end, the level of complaints increased substantially, with the majority of complaints coming from claims management companies.
and
The provision is not intended to cover the eventual cost of all future complaints; such cost remain unknown. There is significant uncertainty around: the emergence period for complaints; the activities of claims management companies; and the developing view of the FOS on individual affordability complaints, all of which will significantly affect complaint volumes, uphold rates and redress costs.
Contents
Background
What is an affordability complaint?
The FCA – and the previous regulator, the OFT – says that a lender has to make proportionate checks that a loan is going to be affordable for the borrower. A loan is only affordable if it is likely the repayments can be made without the borrower having to borrow more money to afford them and without getting behind in their other debts and essential bills.
FOS has set out how it handles affordability complaints here: Unaffordable lending.
If a customer wins a complaint, they are refunded the interest they have paid. For an outstanding loan, the balance is changed so they only have to repay what they borrowed.
In the last two years, affordability complaints have caused the failure of the largest three UK payday lenders: Wonga, QuickQuid and the Money Shop and a string of smaller ones. And they contributed to BrightHouse’s collapse this year.
Affordability complaints for guarantor loans
Although the existence of the guarantor gives Amigo additional comfort it will be paid, the loan still has to be affordable for the borrower. If a loan is found to be unaffordable for the borrower, the guarantor is released and any repayments the guarantor has made are refunded in full.
The loan also has to be affordable for the guarantor. Many guarantors have houses, but this does not change the Amigo’s obligation to check the loan can be repaid from the guarantor’s income.
There is a template letter for a complaint by a borrower and one for a complaint by a guarantor.
Guarantors may have other reasons to complain and ask to be released as the guarantor, for example if the responsibilities of a guarantor were not properly explained.
Increasing numbers of Amigo complaints
Amigo started getting increasing numbers of affordability complaints from the second half of 2018 but at this point the numbers were small.
In 2019, FOS issued two lead decisions, one for an affordability complaint by a borrower and one by a guarantor. These decisions set out what FOS would look for in guarantor loan affordability complaints. After this FOS started upholding the large majority of guarantor loan complaints. In the second half of 2019, it upheld 94% of Amigo cases.
Amigo then changed to upholding many complaints from customers in line with FOS decisions, as the FCA rules say it should. Complaints numbers started to go up including complaints through Complaint Management Companies.
James Benamor founded Amigo but had retired from the board when it floated on the stock market in 2018, when he owned over 60% of the shares. In December 2019 he went back onto the board. He resigned in March 2020 saying that:
Amigo had, for six months, been lending almost entirely in a way that matched their own complaints team’s definition of ‘irresponsible’.
and advocating that Amigo should take FOS to court for a judicial review. Benamor then called for the board to resign. When he lost these resolutions in June, he started a programme of selling 1% of the company’s shares a day which is continuing.
2020 – a backlog of complaints and the FCA intervenes
Around the start of 2020, Amigo started rejecting almost all complaints and a backlog began to built up. Some of these had been sent to the Ombudsman, others were still with Amigo.
Complaints numbers were increasing as more people heard about them and Claims Management Companies submitted increasing numbers of complaints:
- in May Amigo agreed a Voluntary Requirement with the FCA to work through a backlog of 9000 complaints by the end of June 2020;
- in July Amigo announced that the FCA agreed to extend the period to the end of October 2020, because the number of complaints had “substantially increased”.
On 1 June Amigo announced that the FCA had started an investigation into Amigo’s creditworthiness assessment process and whether it is compatible with regulatory requirements, covering the period from 1 November 2018 to date. Amigo says:
There is significant uncertainty around the impact of this on the business, the assumptions underlying the complaints provision and any future regulatory intervention.
The impact of Covid-19
Before the pandemic, Amigo had already cut back on lending, with tighter underwriting assessments and a reduction in repeat lending to existing customers.
With lockdown, Amigo halted all lending apart from loans to some key workers.
Amigo has given 47,000 customers payment deferrals. The FCA stated that guarantor lenders could not ask guarantors to pay if the borrower is taking a Covid-19 related deferral.
Amigo says it is not adding on extra interest for the first three months break. Borrowers can now ask for a second three months break.
Just how many complaints are there?
Today’s results are silent on the current number of complaints and the average cost of settling them.
They give a detailed sensitivity analysis in the accounts looking at the effect if more complaints are upheld or if the average cost of upholding the complaints increases. But they do not say what the current baseline is or what assumptions management have made about future complaint numbers:
- how many complaints did Amigo agree to settle in 2019-20?
- how many has Amigo agreed to settle so far in 2020-21?
- how many does it yet have to make a decision on?
- how many new complaints are arriving each month?
- what percentage is it currently upholding?
- what is the average cost of a complaint it has upheld?
Amigo was asked about some of these numbers in the Investor Webcast following the results. It said it wasn’t disclosing them for commercial reasons.
Comments on this article are now closed.
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David says
Not surprised really ,I advise anyone with a complaint to ask financial omdsman for help ,I owed them £8000 ,but my case upheld and £8000 wrote off amigo are bullies.
Robin says
I have had a complaint with Amigo since September 2019. Firstly, Amigo rejected my complaint claiming it was outside the 6 year bracket and that they didn’t have records on their system from my previous loans with them as they’d erased them.
I took my claim to the FOS who upheld my complaint because they agreed with me that it was in the relevant time for me to make a complaint.
Amigo accepted the FOS decision at first and we’re about to proceed to the next point in the complaint process.
I was then informed by my adjudicator on the 1st of this month (July) that Amigo had changed their minds and were now in the process of defending their side! They again stated that the loans happened too long ago and that they didn’t have any records left on their system.
My adjudicator asked me for some further information, which I have provided, and I’m now still waiting for a response from both the FOS and Amigo.
All throughout this process, Amigo have been stubbornly sticking their heels in about my complaint even though I have provided ample evidence that my complaint is valid and that also my adjudicator agrees with me
Craig says
My wife put an affordability claim in March.
She had originally borrowed £5000 April 2018, with a top up to £5500 in August 2018. This was due to be paid off in August 2020. In June amigo got back to her to uphold her complaint with a promise to repay all interest etc, this amounted to £640, with £1019 left to pay on the loan. Something was off straight away as she had paid £8100 in payments since the start of the loan.
After phoning the complaints team to see how they had calculated it they told us the calculations were right. Their advise was to just go through the FOS.
This we did after the call feeling that amigo had just sent a low ball offer basically to see if she would accept. 3 days later we received and email from a member of the amigo complaints team had said that again they were right and to not go to the FOS. They stated how the calculations were completed and the maths was completely incorrect.
We responded by highlighting the basic maths they used and the errors showing the actual figures using their own statements. With in 2 days amigo have come back again to say that it is actually £2400.
My wife has decided to accept this just to get it off her credit reports and done with even though it is still £300 down on the calculation and I assume around £60 of the 8% interest.
I feel amigo will be doing this more and more to try and get people to accept lower offers to limit their costs.
Jim Burnside says
The worst company ever I started with £2000 kept asking me to take more and clear old it eventually went to £10,000 which I must have now paid back around £18,000 and they still want another £8,000 an absolute disgrace how they bully and get away with this…I’m now going to get legal help to solve this issue.
Sara (Debt Camel) says
Do not go to a firm offering “legal help” before you read this page https://debtcamel.co.uk/how-to-complain-guarantor-loan/.
As you can see there it is very simple to put in a complaint your self. If you go through a firm of solicitors they will probably just send much the same email and charge you a fortune for doing this. complaints through Claims companies, including solicitors, are not dealt with any faster nor any more likely to succeed.
Have a look at all the comments below that page – there is a community of people all going through the same think who you can ask for help and advice if you aren’t sure what to do.
Janet says
You can challenge Amigo and win your case, without needing to involve a third party. Just be persistent and don’t give in to the tactics they use to try and convince you that the loan has been appropriately managed. I got an elderly relative removed from being a guarantor after 12 months of arguing with them. I used the template on the debt camel website to write my initial complaint and asked for the recording of his phone call agreeing to be a guarantor. I believed he had been scammed into doing this. When I received the recording of his conversation with Amigo it was shockingly bad. Anyone listening to it would have to agree that he had no idea at all of what he was agreeing to and no checks had been made on its affordability for him. Amigo refused to accept that the call showed evidence of inappropriate lending and I complained to the FOS. Even though there was a complaint pending, Amigo continued to seek money from my relative and even passed our case on to a debt collection agency. This resulted in lots of phone calls and texts asking for payment. I’m sure if my relative had been dealing with this alone he would have paid at this point even though he couldn’t really afford it. Eventually Amigo conceded to the FOS that he shouldn’t have been allowed to be a guarantor and they refunded all payments he had already paid plus interest.
Ryan says
Hi Sara,
Do you think Amigo will enter administration anytime soon? I’m getting nervous as I am waiting my refund. which amounts to nearly 7K.
Thanks
Sara (Debt Camel) says
They seem to have a lot of money in the bank!
Zoe says
Hi Sara,
I have put in a complaint as a guarantor. I am on my 6th week of waiting for a response but have been told they will send their final response within 8 weeks.
There was an initial loan which I payed almost all of the payments (~£95 a month), for as the borrower defaulted, due to it being unaffordable from the beginning as they didn’t have a job at the time of taking the loan out. My outgoings at the time exceeded my incomings and we’re not properly checked. As the borrower was in and out of jobs, I was pressurised into getting a top up loan by the borrower (who I already had financial links with such as 4 other loans) with the view that they were going to be paying this loan and low and behold, I have payed almost 2.5k of the top up loan in repayments each month (~£195). I have got myself into serious debt problems with this loan, Amigo would have known at the time of the top up loan that I had been making all the repayments due to the borrower defaulting and yet they allowed this to be done with no additional proof required such as bank statements or proof of income.
I am asking to be removed as the guarantor and to have all of the payments refunded. Do you think I stand any chance?
Zoe says
Hi Sara,
It is the 8th week on 5th August and I have not yet received a response and speaking to the account manager today, it looks like there won’t be one by this date. I have today said that I will be taking this to the FOS if no response or update by then as they have not stuck to their 8 week guideline, which they mentioned in an acknowledgment email in regards to my complaint and they have not updated me within this time in regards to needing more time etc to look at it. Do you think this is the right thing for me to do or do you think they will delay their response further due to it going to the FOS?
Sara (Debt Camel) says
I don’t think going to FOS will make Amigo slower.
Zoe says
They have sent their final response. As expected they have not upheld the complaint. I am disgusted with them as a company, it has information within the final response which has been falsified regarding asking for documents to support incomings/outgoing- I was never asked for these either from myself or from the borrower. They have also falsified information regarding available ‘buffer’ money.
It is currently with the ombudsman but it may take months and it’s just dragging on now. I hope that there’s some relief soon.
Sara (Debt Camel) says
it has information within the final response which has been falsified regarding asking for documents to support incomings/outgoing
I haven’t heard anyone else say that. But it isn’t going to do their case much good if they say they asked you for something and then gave the loan when you hadn’t supplied the details!
What is the rest of your financial situation like, do you have other problem debts?
Zoe says
I have always been in a sticky situation, but now I am in a bad situation financially from this loan, I took out a loan of £167.68 in between my partner taking out the initial and top up loan and it was never properly checked by Amigo that it was affordable for myself or Andrew.
I had to take a further loan of £119.97 a few months after the top up loan as it was all mounting on top of each other and debt began to spiral, as I was left to pay everything back myself as the guarantor.
Before the Amigo loan was granted I had 2 loans already standing of £64.95 and £110.00. They also said that I hadn’t taken these loans out in the 6 months before the loan but I had. The £110 one was taken out in the November 2018 prior to the March 2019 initial Amigo.
(All lies!! And I hope that they get investigated further for this!)
I hope I really stand a chance at winning this.
Sara (Debt Camel) says
I too hope you will win that.
I asked about your current situation as it may be that a debt management plan would be a good options for you. This could take a lot of the pressure off you while the ombudsman case goes through? As a guarantor, the Amigo loan can simply be included in it. Then if you win the case, it would be removed and any refund you get could help you to clear the other debts.
StepChange can look at your whole situation and will explain how DMPs work and pros and cons. If you want a DMp they can then set one up. See https://www.stepchange.org/how-we-help/debt-management-plan.aspx
Paul says
I’m waiting for my refund from Amigo my case has been on going since January I’ve had my figures and accepted my refund just waiting for a payment they are ignoring all emails find the whole thing disgusting