Will an Amigo Scheme of Arrangement abandon vulnerable customers?

We still know very few details about Amigo’s proposed Scheme of Arrangement.

I asked some questions in Amigo seeks refuge from complaints and made some estimates of the payouts consumers might get in Amigo – estimated numbers don’t look good.

But there are other, wider-ranging issues about Amigo’s proposed Schemes of Arrangement. So this is the first of a series of three articles:

1. The effect of a Scheme on vulnerable customers.
2. The implications for the wider bad credit market.
3. How Financial Ombudsman (FOS) decision making can be speeded up.

A whole book could be written about the different ways vulnerable customers can have problems with guarantor loans – I wrote about some of them in Guarantor loans – why guarantors & borrowers need extra protection. But here are a couple of very recent cases for illustration.

Case 1 – mental health problems

The borrower informed Amigo when he made an affordability complaint in September 2020 that he had major mental health issues, providing evidence from his doctor of a failed suicide attempt and gambling addiction. Since then, he thinks he called Customer Services more than a hundred times asking for a Final Response to his complaint, which should have been given in 8 weeks. In December he was informed that he would not get a response until at least March 2021 – presumably because of the proposed Scheme.

He said

“I simply cannot wait this long as 16 weeks has already deteriorated my mental health state and I am in hospital awaiting treatment from a psychiatrist.  Please can this be escalated or can you please get someone to look again into this and issue my final response I’ve been waiting months for. I cannot take much more of this.”

Mental health problems by themselves are not a reason why a complaint should automatically be upheld. But they should have meant that his complaint was looked at promptly and sympathetically. Any responsible lender should ensure that their debt collection and customer service departments are alert for vulnerable customers, but despite the medical evidence and the extraordinary number of phone calls, either no-one looked at his case at all or they inexcusably didn’t realise this one required different handling.

When I tweeted about this case Amigo asked to be put in contact and they then rapidly decided to clear the balance owed.

Case 2 – financial abuse

A guarantor complained that she was coerced into taking out the loan by her partner. They split up and her ex stopped paying, she says in order to put more pressure on her. There was a police investigation into stalking, assault and harassment and he has been charged. She has had to take out a restraining order against him.  All this was reported to Amigo.

Going through an Income and Expenditure statement showed Amigo that she has no disposable income with which to pay the Amigo loan. At first Amigo suggested she should just delay paying other people, but they then agreed she could not afford to pay anything. They then still persisted in threatening her with defaults and a CCJ, even though there was a complaint open with Amigo and then later with FOS.

She says:

“I think despite all the abuse and the fact they should never have [accepted me as] guarantor they are basically focussing on my finances and ability to pay it… Yet for me every time I have contact from Amigo it drags me back to where I was with my ex and it’s hard, it brings on nightmares and migraines and I dip mentally.”

Amigo also asked to be put in touch after I tweeted about this. Unfortunately so far there doesn’t seem to have been a resolution. EDIT – on 14 January Amigo agreed to release her as guarantor.

Implications for a potential Scheme

These two cases illustrate some important points for considering a possible Scheme.

1. Vulnerability issues are not just confined to the initial lending decision. They can occur during collections and complaint handling and at all these stages poor lender behaviour may result. In some cases, FOS may have awarded additional compensation beyond the standard “refund of interest and charges plus statutory interest”. How will this be handled in a Scheme? Will a focus on “affordability” mean other problems are ignored?
2.  Amigo seems to be saying it has transformed into a new, more responsible company with the change of management and directors since the summer. There is no evidence of this transformation extending to proper vulnerability handling in its collections or complaints departments. If Amigo cannot spot that these two extreme cases needed special attention, how many hundreds or thousands of other vulnerable people are being threatened with court when they have no money to pay?
3. Does Amigo intend to carry on threatening people with court during the Scheme? Or will it accept that it should not pressure people to make payments they cannot afford when they have a claim in progress?
4. What proposals for separate and speedy handling of vulnerable customers is Amigo including within the Scheme? If there aren’t any, how can this possibly be acceptable to the FCA, that an authorised lender can ignore vulnerable customers and insist they go through the same protected process that other claims do?