Amigo Loans reveals new program to cap compensation and save business

Amigo Loans bosses believe they could save his 200 jobs in Bournemouth and start lending again on a “very different” model if an offer to save the business is approved.

Amigo is hoping to get approval for a new program to limit compensation for customers who have complained of abusive sales – and warns it will become insolvent without a deal.

The company suspended new loans last year, but says it has 25,000 visits per month to its website to see if it is offering loans again.

He says he will be able to allocate more money than previously thought to compensate customers, after the Covid crisis turned out to be less severe on household budgets than it had planned. He has also had another year to collect loan payments since he was forced to stop lending.

The company made a statutory profit before tax of £ 2.1million in the six months leading up to September 30 of this year, following a loss of £ 62.6million in the same period year last.

Amigo set up an independent client committee after the High Court rejected an earlier attempt to cap compensation. He consulted with committee members to see if they wanted a share of the business or its profits.

Managing Director Gary Jennison told The Daily Echo: “It turned out that they didn’t want either of those two options. What they wanted was the immediacy of the money, as much money as possible and as quickly as possible, so they didn’t want a share of the future value of the business, they just wanted to pay and that’s what we accepted.

“I hope we now have a program that matches what the clients committee wants. ”

He said the new program had to be approved by the clients’ committee and the Financial Conduct Authority before going to the High Court.

Amigo has always offered loans at an annual percentage rate (APR) of 49.9% to people with a friend or relative to vouch.

But the bosses have worked on a new business plan, offering three product lines, two of which are under a new brand.

Mr. Jennison said, “He will be offering unsecured personal loans without a guarantor. It will also offer, within the new brand, a guarantor loan. And it’s going to deliver the old Amigo brand, so we can meet a much wider range of needs than ever before and, more importantly, help people repair their credit scores.

Customers would be offered an annual payment holiday and the option of reducing their interest rate three times over the life of a loan, from 49.9% to 34.9%.

He admitted times were tough for Amigo’s staff in Bournemouth, who have grown from over 300 to around 220.

” It’s a big problem. That’s why we need to be allowed to quickly regain credit in order to revive the business and help this group of customers who need us, ”he said.

“When we go back to credit, say next summer, it will be small because we won’t have any credit facilities to be able to finance the business. We can only lend with cash resources, which will be quite discreet, ”he said.

“But that will allow us to prove the concept, to prove to the regulator that we are doing it very differently and that we are a different company, we are not the old Amigo, we are doing it in a new way and the best way. And then lend a little, get some credit that we can increase again, because there is a demand there.

“Twenty-five thousand people every month go to our loan page on the website – ‘Is Amigo ready? They have nowhere to go. Many of them go into the unlicensed sector because they don’t have a choice. ”

He pointed out that Amigo’s senior management had changed since she racked up the complaints. “None of us got anything out of it, none of us caused any problems and we are trying to save the jobs of 200 people,” he said.

“So you can punish Amigo Loans Ltd, yes, but for what purpose? ”

Amigo’s new business plan would be based on raising equity, which would dilute the value of the stake of existing shareholders unless they accept an offer to sell them more.

Mr. Jennison said: “The likelihood of significant potential dilution for shareholders is a difficult but necessary consequence of our situation. We have noted this many times, we are an insolvent company so there is no easy path if we want to avoid administration and the only other options are liquidation or managed insolvency, both of which are worse. for shareholders and customers. ”

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