UPDATE on the result of the voting
- voting has now closed. Amigo announced on 13 May that c. 89% of people voting had voted in favour of the new Business Scheme.
- the next stage in the Scheme approval process is the second court hearing which will be on 23 and 24 May.
Over 160,000 people voted, which was twice as many as voted on the first Scheme in 2021. The first Scheme was voted for by more than 95% of people voting.
After the court hearing on 8 March 2022, the judgment issued on 15 March 2022 approved the voting arrangements for the new Amigo Schemes.
The fairness of the Schemes will be considered by the Court in late May, after Amigo customers have had a chance to vote on them.
Two Schemes are being voted on, also the first Scheme has a “fallback” option if it fails. And if neither is approved Amigo will go into administration.
Confused? Many people are!
Amigo’s detailed Explanatory Statement is here. I encourage you to read it even though it is long.
I can’t tell you how to vote but I can suggest points to think about:
- how much money might you get back? Amigo says you may get between 41% (the New Business option) and 31% (in administration) of the proper compensation you should have had;
- people with current loans can get balances reduced or cleared and their guarantor released – that is the same in both schemes and in administration;
- do you want Amigo or administrators to decide on your complaint?
- do you want Amigo to be able to start lending again?
A brief look at the background
In late 2020 Amigo was losing 88% of complaints by customers and couldn’t afford to carry on paying refunds. So it proposed its first Scheme to pay lower refunds.
This was rejected by the Court in May 2021 after the FCA, Amigo’s regulator, opposed it saying that it was not fair to customers and too generous to Amigo shareholders.
Amigo had said it would go into administration if the first Scheme was rejected, but it didn’t.
Instead it proposed a new Scheme, issuing a Practice Statement Letter – a short summary – in December 2021. I have looked at whether this second Scheme is fairer. But the numbers in that article are now out of date as Amigo has changed the payout estimates substantially – see below for the new numbers.
The different options and possible payouts
There are four options:
- New Business Scheme – you vote on this. This is Amigo’s preferred option because it will let them start lending again in the future.
- Fallback option – not voted on. This will happen automatically if the New Business Scheme is approved but then Amigo can’t make it work. This could happen if the FCA doesn’t let Amigo start lending again (the FCA’s current position is here) or Amigo’s shareholders don’t raise the money Amigo needs. Then the New Business Scheme will collapse into this Fallback option.
- Wind Down Scheme – you vote on this. Here the current Amigo company won’t start to lend again and it closes down. (It is possible that Amigo will start lending through a different subsidiary. It has told investors that Vanir Business Financial Limited was there to “hedge its bets”, but this is not mentioned in the Explanatory Statement.)
- Administration – not voted on. This will happen automatically if neither the New Business nor the Wind Down Schemes are approved. So if this is your preferred option, you should vote against both the New Business and Wind Down Schemes.
Do you have an affordability complaint?
A loan is only affordable if at the time it was given, someone could have been expected to make all the repayments and still be able to pay their other debts, bills and living expenses, without having to borrow any more money.
Amigo should have checked a loan was affordable for the borrower and for the guarantor. But it failed to do so in many cases. That is why so many people have been winning complaints against them. And why a lot of people are expected to make complaints to the Scheme or to administration.
If you make an affordability complaint, your Amigo loans will be looked at to see if they were “affordable”.
Who decides on affordability?
- in the New Business, Fallback and Wind Down options, Amigo will make the decision about which loans were unaffordable;
- in the Administration option, the decision will be made by the administrators;
- the option of taking your complaint to the Financial Ombudsman will not exist in any of the options. After a Scheme has finished, you will still not be able to take a complaint to the Ombudsman.
What compensation do you get for an unaffordable loan?
This is for borrowers. There is a section at the bottom of this article for guarantors. NB if you are a borrower, you should encourage your guarantor to read this if there is a current loan.
For people whose loans have been repaid
The compensation is the interest you paid on the unaffordable loan. This is sometimes called redress. Any negative marks on your credit record are also removed.
There is not enough money to pay you the full amount under any of the options. You will only get a small proportion of the true compensation – Amigo calls this the payout percentage.
This is often expressed as “pence in the £” – that is the same as a percentage.
An example – if your compensation is calculated at £2,000 and the payout percentage is 30%, that is 30p in the £ and you would get £600.
For people who still have a current loan
Your balance is reduced so you only have to repay the amount you borrowed.
You are getting the “full” value of this balance reduction, the payout percentage doesn’t matter. You will get the same balance reduction in either of the Schemes and in administration.
If you should be getting more compensation than your balance, the balance is cleared and the rest will be paid in cash. You will get the payout percentage of that cash amount.
- you have borrowed £5000, repaid £3500 and have a balance of £7000.
You have not yet repaid what you borrowed.
If you win your complaint, your balance is reduced to £5000-£3500=£1500. You can repay this at an affordable rate and your guarantor is released. Any negative marks on your credit record are removed.
You won’t get any cash refund so the payout percentage in the different options doesn’t affect you at all.
- you have borrowed £5000, repaid £6000 and have a balance of £5500.
You have repaid more than you borrowed.
If you win your complaint, your balance is cleared, your guarantor is released and you should get cash compensation of £6000-£5000 = £1000. Andy negative marks on your credit record are removed.
If the payout percentage is 30%, you will get £300 of this £1000. But your balance has been cleared, which may have been what really mattered to you.
Amigo has changed the payout percentages significantly
Amigo has estimated the payout percentage for each of the four options.
These are very different from the first Scheme, rejected in May last year, when no one would get any cash payout in administration!
And they are also different from the numbers that Amigo gave in the new Scheme’s Practice Statement Letter in December 2021.
Here are Amigo’s latest numbers showing how they have changed since December:
These are important changes since December:
- with their previous numbers you could have got 42p with the New Business Option, nearly twice the 24p they thought in administration;
- now Amigo says you will get much more in administration – 31p – and the payout in the New Business option has dropped a bit to 41p;
- Amigo now admits that you will get nearly the same amount from administration that you would get from the Wind Down Scheme.
So you can see that the difference between all the options is now much smaller.
The payout percentage is only a part of the picture
It isn’t clear how real these numbers are
Many people want the option that gives them the most money. Fair enough!
But it isn’t simple.
The fact the numbers have changed so much since December may make you wonder how good these estimates are.
Amigo hasn’t explained how it has arrived at the 41p number. This number could be anything depending on how Amigo handles the complaints. If Amigo rejects a lot of complaints the payout percentage will be large, but not many people will get one.
The money you will get depends not just on the final payout percentage but on:
- which of your loans are upheld; and
- whether any deductions will be made.
If you have a loan and Amigo says it is affordable, but in administration the administrators were to uphold your complaint, you would be better off in administration.
31% of something is worth more than 41% of nothing.
Amigo has not been clear how it will decide what loans are affordable. You may not feel sure about what Amigo would decide in your case. This isn’t helpful.
Amigo intends to carry on with the deduction it makes for “for unpaid interest”. No other lenders do it and the Ombudsman has said it is not fair. Some people only lose a few hundred pounds with this deduction but I have seen cases of more than £3,000.
Who do you want to decide your complaint – Amigo or administrators?
If administrators would make the same decision as Amigo, this wouldn’t matter. Amigo thinks administrators would make the same decisions that it will.
But I have seen a lot of high-cost lender administrations over the last three years. In general, administrators tend to try to roughly follow what the Ombudsman would have decided. The Ombudsman was upholding 88% of Amigo complaints, the vast majority for all loans a customer had.
I have never seen an administrator apply a deduction for unpaid interest and Provident does not apply this deduction in its Scheme.
Amigo says it expects to uphold 65% of complaints, but won’t say what percentage of loans it’ll uphold. A lot of people have had more than one loan, so this is important. It may be Amigo expects to reject many one loan complaints and only uphold the last loan in multiple loan complaints.
Many Amigo borrowers and guarantors have already had very poor decisions from Amigo in the past.
The company says it is now under new management. But it has carried on with its aggressive approach to debt collecting over the last 18 months, pressuring customers to make unaffordable payments. And it seems as though it intends to carry on making the unfair deduction for unpaid interest. Has it really changed that much?
Amigo has also said that it will ask some borrowers and guarantors to provide documents in support of their claims when they make them. We don’t know what those documents will be or how many people will be asked.
I have never seen administrators ask for evidence when a customer makes a claim against a high-cost lender. If a claim is rejected by the administrators and goes to an appeal, the customer can then produce extra details they think may help. But Amigo may be trying to put people off complaining by asking for this information.
So there are some reasons why you may decide you prefer administrators to handle the claims and not Amigo.
Do you want Amigo to restart lending?
Some people may not care about this – you may just want as much money as possible.
And some people were quite happy with their Amigo loan and didn’t feel under emotional pressure to protect their guarantor.
But other people think the Amigo loan was one of their worst financial decisions. And they would never suggest that a friend or relative should take a guarantor loan. So they may not want Amigo to be able to carry on lending.
There isn’t a right or wrong here – it depends on how you feel.
Issues for guarantors
There are various reasons you can complain, see How to complain when you are the guarantor for a loan which looks at these.
The simplest complaint to win is often that the loan was often unaffordable for you – at the time the loan was given, was it likely that you could have made all the payments to it out of your spare income, and still been able to pay your own debts, bills and living costs? You may own a house, but that doesn’t mean you had a lot of spare income!
Guarantors of repaid loans:
- You may be able to get a refund if you made payments to a loan.
- If you win your complaint, you will get a refund of part of what you have paid, at the payment percentage rate.
Guarantors of current loans:
- If you win your complaint you will be released as guarantor for the loan. You can also get a refund if you have made payments to the loan.
- If the borrower is also making a complaint, it is good if you too can complain if the loan was unaffordable for you.
- This gives you two ways to be released as guarantor – if you win your complaint or the borrower wins theirs.
The expected timetable if the New Business option is approved
16 March to 10 May Online voting
12 May (optional) online creditors meeting starting at 1pm to consider the Schemes. Register in advance if you want to attend.
12 May (optional) deadline for customers to inform the appointed Customer Advocate at email@example.com if you think the proposed Schemes are unfair.
23 & 24 May 2nd court hearing to consider the voting and the fairness of the proposed Schemes
Late May The Scheme starts. Customers can make claims to the Scheme
End November Deadline for making claims to the Scheme
December 2022 to August 2023 Amigo decides claims and appeals are decided
September – November 2023 Money is distributed to customers with upheld claims.
This is a summary – there are more details in the Explanatory Statement and timetables for all of the other three options.
The mechanics of voting
Voting has now ended.
How do I make a claim?
If your loans have been repaid, you don’t need to do this now, just wait until the Scheme is approved or administration – then there will be a page to enter your complaint on.
If you have a current loan and you have not already complained then it is URGENT that you send Amigo a quick complaint. This protects the money you pay after the complaint, putting some of it into a separate account – if you win your complaint and are due a cash refund, this will be repaid in full, not at the 31% or 41% or whatever rate is eventually paid out.
You should send a very short email to firstname.lastname@example.org with COMPLAINT as the subject. Just say you want to make an affordability complaint about your Amigo loans. Amigo is not going to look at your complaint before the Scheme so there is no reason to write a lot. Don’t think twice about this, there is no downside to doing it, do it now.
Do I have to keep paying my current loan?
If you have paid more than you borrowed for this last loan, read Amigo’s Equitable set off and think if you would like to pause payments until your complaint is decided.
If you haven’t yet paid as much as you borrowed, then read Stopping paying Amigio – the pros and cons which looks at your options.
Any other questions?
You can ask them in the comments below this article, where you can see what other Amigo borrowers and guarantors think.