I asked Amigo about some details of the redress people will get if they make a claim to the proposed Scheme and Amigo upholds the claim.
Amigo has had a complete change in its Board of Directors. It now likes to suggest that it will be handling complaints much better. But the answers to my questions are disturbing.
The “unpaid interest” deduction
Amigo applies this when it has decided a top-up loan was unaffordable but not the previous loan. It works out the refund on the unaffordable loan, but then it takes away “unpaid interest” from the first loan. No other lender does this.
These deductions can range from a couple of hundred pounds to thousands. One reader had more than £5,000 taken away.
The logic behind this deduction appears to be that they are trying to put the customer back in the position they would have been without the top-up loan. And to do this they have assumed that if the second loan was not given, the first loan would have continued to the end, so Amigo would have been paid the interest on it.
But that makes little sense. There is no way of knowing if the first loan would have continued.
Even if the first loan was “affordable” at the time it was taken out, it may not have been by the time the borrower decided they needed the top-up loan. Usually people want to borrow more because they are too short of money, often because of making the repayments to the first loan. So if the top-up loan had been refused, the borrower would have had to look for other options. For example, the guarantor could have taken out a cheap loan to settle the Amigo loan.
The borrower wasn’t given any choice by Amigo – they had to settle the first loan. This was paid off with money the borrower never had. So for Amigo to turn round and say the borrower isn’t allowed to settle that loan seems highly unfair.
What would the Financial Ombudsman do?
The Financial Ombudsman (FOS) has made decisions on thousands of these top-up/refinancing situations across many lenders. It has never suggested that the settlement of the first loan should be unpicked leaving the borrower owing more interest.
Here is a FOS decision about a large bad credit loan, where another lender tried to argue for a similar-sounding deduction. The conclusion was:
I don’t think the deduction Likely Loans wishes to make from the compensation due to Mrs W is fair and reasonable in all the circumstances of this case.
A lot of these Amigo cases have gone to FOS. But in all the ones I have seen decided, FOS has looked at the case and decided that the first loan was also unaffordable, so the unpaid interest deduction was no longer relevant. Of course that also says a lot about Amigo’s poor complaint handling, that it has been rejecting refunds on affordable loans.
Will Amigo continue with this deduction in the Scheme?
This deduction looked like a cunning plan to save Amigo money by paying lower refunds.
On the recent Amigo decisions I have seen, it is still being applied. But I hoped the “new Amigo” might want to change its mind and follow the normal FOS redress process in the proposed Scheme.
I asked Amigo whether unpaid interest deductions would be applied in the Scheme. It would have been very simple for Amigo to say No, they wouldn’t.
But I was given this reply:
Where a customer has a good loan followed by a bad loan, we will be taking the customer back to the position they would have been before they took the bad loan.
That looks like a convoluted way of saying they are continuing with this deduction.
CCJs aren’t going to be deleted
Another question I asked Amigo was whether they would be clearing defaults and missed payments from people’s credit records for unaffordable loans and removing CCJs on an unaffordable loan.
Amigo said they would be clearing credit records – good!
But that they would not be removing CCJs. I have no idea why not. If a loan is unaffordable the customer should never have been taken to court for a CCJ.
A CCJ on your credit record is a major problem and FOS always says the lender should arrange for them to be removed. This involves applying to court for a set aside, the legal term for deleting the CCJ.
So no sign of better complaint handling
This feels rather depressing. Not the new broom coming in with much-needed changes.
Meet the new management… same as the old management…
Amigo Scheme – timetable & voting
Will Amigo reject good complaints?
Provident victims may only get 2% back
Staci says
Yeah this was something i found pretty poor. Would have got an extra £7k had they of takkng that into account 😢
Sara (Debt Camel) says
your unpaid interest deduction was 7k? dreadful…
Mandi says
Do I need to do anything ?
Sara (Debt Camel) says
Hi Mandi,
this other article https://debtcamel.co.uk/amigo-scheme-timetable-approval-how-work/ looks at the scheme Amigo is proposing.
Do you have a current loan with them? Is it hard to make the repayments?
Have you already made a complaint?
George says
My claim is with the FOS at the moment awaiting an adjudicator for unpaid interest for unpaid interest and not upholding first loan. I emailed them earlier this week offering them a compromise and worked out that they would owe me £4,000 if FOS found in my favour, I have offered to accept £2,000 which I explained is a 50% saving and a saving of the FOS fee additionally. Going to be very interesting to see if they reply and if they accept or counter offer. Have you heard of anyone doing this before?
Sara (Debt Camel) says
Unfortunately I think FOS will not pick up your complaint now :(
I would be very surprised if Amigo accepts your offer. They are much more likely to say that your complaint will go into the Scheme.
Chris says
Has anybody contacted the court to object? Surely people wont vote for this shower to get away with how they have treated people? The people who have purchased shares and want to make a killing have no idea how people have been treated. If you are due a redress of thousands but might get a hundred quid or so then you have to vote against this sham. Let’s not forget that Amigo or their shareholders/investors only care about carrying on trading and mugging off those that came before.
Sara (Debt Camel) says
If you want an objection put before the court, you should email $ALLSchemeLtd@freshfields.com and it will be brought to the attention of the court. This needs to be done this weekend for the court hearing on Tuesday!
Give your name and Amigo customer number.
From your previous comments you don’t like the way Amigo is proposing to pay the redress to the guarantor? If that is your concern, you argue to the court that borrowers and guarantors have very different interests so they should be in different classes to vote. Explain your guarantor was happy to take the offered refund but it was unreasonable for you.
If you think the money being offered is pathetically little, you can argue that the Scheme is not being clearly explained to Amigo customers who cannot be expected to know that there are other alternatives, such as the bondholders putting money into the Scheme and that the future contributions from profits could be a lot larger, say 50% of profits until customers are repaid 50% of the refund they should have got, with no time limit on that (or whatever you feel it should be).
Chris says
Thank you. I was helping somebody last year and the handling of the whole process just appeared both unfair and scandalous.
I will look into this tonight and put something together. I would imagine there will be a few that have done the same.
Sara (Debt Camel) says
ok, the email should come from the customer (borrower or guarantor), if it doesn’t they may disregard it.
A depressed adviser says
How can they not set aside a CCJ? Unbelievable. I had a client who won their case and had the CCJ set aside.
Sara (Debt Camel) says
A customer who had won her case and the CCJ was supposed to be removed was told by Amigo that they had written to the CRAs and asked them to remove it! She went back and objected and they have now given in and submitted the N244 form. But it sounds as though they don’t want to carry on doing this in the Scheme.
LEE says
I’ve emailed the court re: my thoughts (certainly around the unpaid interest) and they’ve acknowledged and are going to send an invitation to attend the hearing tomorrow which I’ll definitely try and do.
Russell says
Hi, I’m trying to workout what the unpaid interest would be if my first loan complaint is rejected but my second is upheld. The first loan was 3000 over 3 years which I made 7 payments of 146. I then got a top up to 5000 which 2709 was used to pay off my first loan. I have since made 22 payments of 243 so I now have paid the 5k back. Looking back at my first loan the total amount was 5269, which I paid off 1022 in monthly payments.
So am I right in thinking the unpaid interest would be around 1538 (from 5269-1022-2709 = 1538).
Sorry if you have answered this question already but I can’t find anything that makes this clear to me. It would be really nice to know when I’ll no longer have this hanging over my head. Thanks
Sara (Debt Camel) says
Sorry, I don’t know how the calculation works. Some examples I saw last year looked like a random number generator.