The subprime lender Amigo, which paused new lending after the coronavirus outbreak, has struggled to deal with an avalanche of complaints from customers and said it would not offer loans until next year.
The firm received 25,571 customer complaints about a range of issues, and had been instructed by the Financial Conduct Authority to deal with them within eight weeks, by 30 October. Amigo said it had reviewed and reached a decision on all of the complaints, but had yet to issue final responses to customers on 2,517.
Of those, 2,209 relate to complaints where significant guarantor payments on a loan have been made. Amigo was founded in 2005 and is the UK’s largest provider of guarantor loans. It uses friends and family to guarantee repayments on loans to people who are unable to borrow from traditional lenders due to their credit histories.
The firm said it had turned a corner in its handling of complaints but admitted that the number had remained at a high level for longer than expected. After a surge, especially via claims management companies, its provision for complaints will increase from £116.4m in the first quarter to more than £150m.
During the three months to the end of September, Amigo paid out about £47m of compensation to customers – 60% in cash and the remainder through loan balance adjustments.
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The City watchdog is also investigating how Amigo, which provides guarantor loans at an annual interest rate of 49.9%, has been assessing customers’ creditworthiness.
The firm stopped offering new loans to all customers except key workers after the Covid-19 outbreak and extended payment holidays to 47,000 of its 199,000 clients. As a result, its profits fell to £3m in the three months to 30 June, its first quarter, from £18.1m in the same period last year.
As it was not lending much to key workers and because of the challenges of the imminent second lockdown, Amigo has decided to focus on collecting money due and handling complaints, and to return to lending next year.
Gary Jennison, who became Amigo’s chief executive in September, said: “We will be back lending to our customers that need to access an Amigo loan as soon as we can, but do not envisage this being before 2021.”