In Mid September Amigo told some customers who have made complaints that they can stop paying and their guarantor won’t be asked to pay.
Amigo is only letting customers who have paid more than they borrowed exercise this right – I think that is wrong as legally a customer can have this right even if they have repaid less – if their complaint is upheld their balance would be reduced, their guarantor released and they can pay the remainder at a lower, truly affordable rate.
But if Amigo won’t let you opt for this, then your choice is what it was before – decide whether to stop paying Amigo or not. This article looks at the pros and cons.
The Financial Ombudsman (FOS) has recently 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 that sounds like you do have reason to complain, send Amigo a very short email to email@example.com with COMPLAINT as the subject. Just say you want to make an affordability complaint about your Amigo loans (or give one of the other reasons a guarantor may have).
Amigo is NOT going to investigate this complaint, so don’t worry about the wording – the only reason to send this is to make it clear why you are stopping paying.
Amigo says you still legally have to pay [NB they have now changed their mind about this – see UPDATE at the top of this article]
Amigo keeps repeating that you have to continue your loan repayments.
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
Even if you can afford the repayments – easily or at a stretch – you should consider if paying is in your best interest.
For a borrower, once you have paid more than you borrowed, every payment you make just increases the cash refund you might get in a future Scheme. (And if you had previous unaffordable loans, you reach that “cash refund” point even sooner.)
And a guarantor will be owed a cash refund of all the payments they have made if their complaint or the borrower’s is upheld.
In Amigo’s first Scheme, they estimated you might get 10% of any cash refund calculated – I thought that was optimistic and that it might be less than 5%. So for every month you pay them £200 now, you would have got £20 – or less – back eventually.
A new Scheme should be more generous to customers – but the chances are you are still only going to get a very small amount of your money back.
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 firstname.lastname@example.org ) that they are stopping paying and will not restart until their complaint is considered by Amigo.
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;
- you may be much better off if your complaint is upheld in a new Scheme or administration if you don’t pay, as any cash refunds will be small.
- 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.
This is the FCA’s fault – complain about the FCA?
FOS has stopped work because of the FCA moratorium
I am not surprised FOS has stopped looking at cases. As the FCA is allowing Amigo to have an “informal moratorium” on paying refunds, Amigo would ignore any FOS decisions.
So the pressure you are being put under to pay is the FCA’s fault, not Amigo’s.
This moratorium has been going on much too long. The FCA should be insisting that this moratorium is “two-way” – if Amigo doesn’t have to consider your complaint, you should not have to pay.
You can complain to the FCA about their decision
If you don’t think it’s right that Amigo can push you to pay and ignore your complaint, you can send the FCA a complaint stating that the FCA has made the wrong decision here and is harming customers.
To do this, send an email to email@example.com subject: “FCA needs to protect Amigo customers from pressure to pay”.
You could also copy this email to your MP (get their email here) and to firstname.lastname@example.org and email@example.com.
Here are some points you could make, put them into your own words! Tell your story, but very briefly. This complaint is not about Amigo but about what the FCA has done that is allowing Amigo to pressure you into paying money you may not owe.
1) Give your name and address. Say if you are the borrower or guarantor of a loan. Say when you made a complaint to Amigo and if it is now with FOS.
2) Say you are complaining that the FCA has allowed Amigo Loans to have an informal moratorium on the payment of redress claims by Amigo.
3) explain that Amigo is saying you have to continue paying but you have a valid complaint that would mean you do not owe them anything if it is upheld in any Scheme or administration. Point out you will lose most or all of this money you are paying if you win the complaint as you will get little back in any scheme. By allowing Amigo this moratorium, the FCA is harming customers.
4) end by saying what you want the FCA to do to put this right
– the FCA should tell Amigo that they must inform all people who have made a complaint that they do not need to make payments until their complaint has been decided.
– and that if a complaint is upheld, Amigo should have to refund all the payments a borrower or guarantor has made in 2021 because they were put under unfair pressure to pay money they did not owe.
This is a formal complaint about the FCA. If it is rejected or they say they cannot decide this at the moment because it is an ongoing matter, reply that this is urgent because it is causing you harm and send it to the Independent Complaints Commissioner – that is the equivalent of the Ombudsman.
The FCA will not look at your complaint against Amigo itself. Making this complaint about what the FCA is doing may not get anything done quickly – but the FCA needs to know the distress it is causing. And if enough people complain it may make a difference.
This article Amigo’s Scheme rejected – now looking at other options is kept up to date
Amigo – what is happening with “Scheme 2.0”?