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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.

Despaing wona - Vunerable customers will be abandoned in a Scheme of Arrangement

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?

January 12, 2021 Author: Sara Williams Tagged With: Amigo, High cost credit news/policy

Comments

  1. Sean says

    January 12, 2021 at 4:53 pm

    Hi sara
    Do you believe this will come into affect, actually started my case in March and its been with the ombudsman’s for 5 months with no picking up my case, this would be a joke if this does happen? Also as I’m in a complaint should I still be paying obviously I don’t want to risk my guarantor

    Reply
    • Sara (Debt Camel) says

      January 12, 2021 at 5:02 pm

      Not a very funny joke, sorry, I have no idea what will happen.

      On the numbers you gave before, if all your loans were upheld you would get the current loan wiped and several thousand pounds back. If the Scheme goes ahead in March or April say, you will have effectively thrown away the payments you make before then, as they just reduce your balance and increase the refund, which you are likely to only get pennies for.

      What is your guarantor’s financial position? Could you explain this to them and say you want to stop paying but they then have to cancel their direct debit to Amigo? Sorry, there aren’t any easy decisions here.

      Reply
      • Chris says

        January 12, 2021 at 5:13 pm

        It was my understanding of the initial announcement that they would deal with complaints that had already gone to the FOS prior to their pie in the sky, scheme idea.
        I understand there are a few cases that have gone to a higher level in FOS in terms of the way redress was worked out and returned to borrower and the interest debacle.

        Reply
  2. DAW says

    January 12, 2021 at 11:18 pm

    Hi Sara,

    My wife is disabled, has mental health issues and had ten separate loans with Amigo over the years starting way back. They know about this and we filled out the redress guarantor etc questionnaire and we were then told we should have an answer pre-Christmas. Then the announcement was made on the 21st and the rug was pulled out from underneath her. Although they say they are still processing complaints it’s just that they are not issuing redress refunds, this is in fact a lie as they clearly know the figures etc but refuse to forward them to the borrower. I’ve submitted a SARS to see if the information is held on the system at all or how far the complaint has got. I also had a complaint which took into account three loans including a current loan and this was completed in 14 days start to finish, including balance reduction.

    This whole debacle has had a huge impact on both our mental health issues and my wife’s physical wellbeing has also been impacted which they have known since started the complaint back in September. The FOS have told us that it’s likely to be some months before they even allocate the case even although it was escalated on the eight week deadline. We are looking into small claims court action once the SARS has been received as I think it will be too late for FOS to do anything about it once they pick it up.

    Reply
    • Sara (Debt Camel) says

      January 13, 2021 at 6:50 am

      Unfortunately if the scheme goes ahead a small claims case is barred. Also those cases are not fast, if the scheme doesn’t go ahead you are likely to get a response from FOS faster.

      Do either of you have a current loan from Amigo?

      Reply

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Latest news round-up:  January 10th

  • Lessons from Amigo – FOS complaint handling needs to be faster
  • Amigo’s Scheme – who’s next? Implications for the bad credit market
  • Will an Amigo Scheme of Arrangement abandon vulnerable customers?

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