In December Amigo has published its new second Scheme. From March you can now vote on this – see Amigo’s New Scheme – which way should you vote .
This new Scheme includes a Trust Account that was set up in December 2021.
If you have made a complaint, all your payments from here on will be kept in this Trust Account. They will then be repaid in full (not at 42p in the £) if your complaint is upheld by the Scheme and you are owed cash redress.
This means you will not lose money by continuing to pay Amigo IF you have already made a complaint.
Not complained yet? Send Amigo 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 (a guarantor can complain the loan was unaffordable for them or for the borrower – or both!)
Amigo is NOT going to investigate this complaint, so don’t worry about the wording – the only reason to send this is to make sure your payments from now on go into the Trust Account.
But you may still want to stop paying Amigo if you simply cannot afford the payments. The new Scheme may start in May next year – it could take an extra 6-9 months before your claim is decided – that is a long time to keep making unaffordable payments…
The rest of this article looks at whether you should stop paying and the pros and cons of this.
The Financial Ombudsman (FOS) emailed customers saying it has put Amigo complaints on hold because:
… even if we were to now investigate and even uphold your complaint, we understand that Amigo wouldn’t pay you the compensation we awarded.
This follows a decision by the FCA to allow Amigo an “informal moratorium” on paying refunds.
Many people now want to know if they should carry on repaying an Amigo loan and what will happen if they stop. As one Amigo customer said:
Amigo seem to be able to just carry collecting payments from all those mis-sold loans. This just does not feel right… Who is going to sort this mess out for the people if not the FOS?
That customer has decided to stop paying Amigo. Should you do the same? This article looks at what is likely to happen if you do.
Have you made a complaint?
This article applies to people with an open complaint at Amigo or at FOS. If you haven’t, see the top of this article for how make a short complaint right away. it’s important you do not delay.
Amigo says you still legally have to pay
Amigo keeps repeating that you have to continue your loan repayments.
The only exception is where they are offering to let some borrowers pause payments if they have paid more than they borrowed on the current loan, see Amigo’s Equitable set off for details about how this works.
It is correct that your loan still legally exists. But so does your complaint.
If your complaint is upheld, the interest would be removed from the current loan and any refunds from previous loans would reduce your balance. And a guarantor will be released from any liability if the borrower’s complaint or their complaint is upheld.
So in that case you may owe Amigo nothing.
Your duty to pay the loan is NOT more important than your right to have your complaint assessed. Amigo is just trying to bluff you into paying.
Two reasons to stop paying
1) Many people can’t afford the payments
This isn’t a temporary situation that will be sorted out in a few weeks. It is very unlikely your complaint will be decided in less than six months and it could be a year or more.
So you have to decide if it is even possible for you to struggle on that long. Borrowing more from family or getting behind with bills is a disaster.
It is also a big problem if you can only pay Amigo by not paying some other debt. If you stop paying Amigo and win your complaint, all negative marks on your Amigo credit record will be removed. But if you stop paying other loans and credit cards in order to pay Amigo, when you win your Amigo case you will still be left with a wrecked credit record.
And there is no reason why you should pay Amigo, or why your guarantor should be asked to pay, when they are refusing to look at your complaint.
2) you don’t want to waste your money
This was a problem before the Trust Account was set up. but it now isn’t an issue provided the repayments are now affordable for you.
What happens if you stop paying Amigo?
How to stop paying Amigo
A borrower needs to cancel their direct debit to Amigo. And you also need to explain to your guarantor why you are doing this and why they too should not pay Amigo.
A guarantor needs to cancel the direct debit and also phone up their bank to cancel the Continuous Payment Authority (CPA) Amigo has over their debit card. They should do this even if their debit card has been replaced with one with a different number.
Some banks are saying Amigo may reinstate the CPA. Point out to the bank that the FCA says Continuous payment authorities: it is your right to cancel and that if a payment is taken, the bank will have to refund it.
Both borrower and guarantor should tell Amigo (email email@example.com ) that they are stopping paying and will not restart until their complaint is considered.
What happens to your credit record?
If a borrower stops paying, they will get missed payments and later a default showing on their credit record.
Obviously if you have had other recent credit record problems, one more may make little difference. And if the complaint is later won, these negative marks will be deleted.
A guarantor’s credit record is not harmed if they refuse to pay because the Amigo loan does not show on there.
Will Amigo take you to court? Not likely!
If you stop paying you may get emails and texts from Amigo saying you have to pay and making threatening noises about taking you to court.
Here is a typical one:
As there is no resolution in place, soon you may be issued with an LBA (Letter Before Action), this is a legal notice which will allow you to come to a resolution prior to a court claim being considered. In Court, an order for the full balance will be sought. A CCJ may be issued against you and your guarantor.
Amigo has worded this very carefully so most people will think it sounds very threatening. But look at the words they used:
They MAY issue you an LBA. They aren’t saying they WILL. I may win the lottery next week, but I probably won’t!
A court claim will be CONSIDERED. Again they aren’t saying this WILL happen. I will consider running a marathon next month, but my decision is going to be that I won’t.
Here are some of the reasons why I think Amigo is not going to take you or your guarantor to court at the moment if you have an open complaint:
- The FCA’s CONC rules say they should not when a debt is “in dispute” – your complaint is a dispute. Amigo won’t want to annoy the FCA at the moment by trying this.
- Getting a CCJ is a very slow process. A claim took nine months to come to court on average in 2019, and the backlog has got longer since then with the pandemic.
- You can defend a court claim on the grounds that the loan was unaffordable, make a counterclaim that Amigo owes you money for a refund, ask for the court case to be put on hold until your complaint is decided… Amigo knows all this why would it start a case so problematic?
- Amigo told the court for the first Scheme that it would not take anyone to court in the Scheme until their complaint had been decided.
In the last year, I don’t remember Amigo taking any customer to court where they have an open complaint. The threats appear to be empty.
Summary – the pros and cons of stopping paying Amigo
- not paying Amigo may let you pay your bills, other debts, feed the family and not get deeper into debt elsewhere.
- your guarantor will be asked to pay and will also have to refuse to do this;
- a borrower’s credit record will be harmed, but this will be repaired if you win your complaint. A guarantor’s credit record is not harmed;
- you will get emails and texts from Amigo saying you have to pay and making threatening noises about taking you to court. These are empty threats but unpleasant to get.
Some people simply have no practical alternative – they can’t pay.
But if you aren’t sure what to do, talk to National Debtline on 0808 808 4000 about this Amigo loan, your complaint and the rest of your financial situation.
The main article on Amigo’s Scheme is now:
Amigo’s new Scheme – voting