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FCA raises concerns over Amigo’s proposed redress scheme but 'won’t take action to block it'

The largest guarantor loan lender Amigo Loans has admitted the financial regulator does not support its proposed new redress scheme. But it says it's been told the regulator doesn't plan to take action to stop the scheme if it's agreed on by borrowers and sanctioned by the High Court. 

Anyone with a current or future guarantor-loan mis-selling claim against Amigo Loans may not get the full amount they're owed if the new scheme proposed by the lender goes ahead. It's put forward the plans in a bid to stave off liquidation given the surge of complaints it's facing.

In a statement issued today, Amigo Loans said: "The FCA [Financial Conduct Authority] notified Amigo... on 23 March 2021 that, having completed its assessment of the terms of the scheme, while the FCA does not support the scheme, it is not currently proposing to take any additional regulatory action that might stop the scheme were it to be agreed by the scheme creditors and sanctioned by the court, but the FCA reserves the right to change its position."

The FCA told us it has made Amigo aware of its concerns but said it was unable to add to what the firm had said. founder Martin Lewis has previously called on the FCA to act to protect Amigo borrowers. He said on the issue last week: “I would call on the FCA to intervene, to make sure a fair and proportionate balance of the money available from Amigo for redress is given back to customers, who have often had their lives made very difficult by being mis-sold hideous, over-expensive loans.”

See our Guarantor Loans guide for full info on how to reclaim mis-sold loans for free. 

Amigo has proposed a cap on payouts

Amigo wants to create a new redress scheme to limit what it pays out as, otherwise, it admits it could go bust. If that happened, it says borrowers would get even less than under the proposed scheme, the details of which are as follows:

  • There would be a cap on payouts and mis-sold customers wouldn't get full payouts. Amigo admits "not all claims relating to customer redress will be paid in full" but it is not yet clear what percentage people would get. All Amigo has said for now is that it would initially set aside £15 million, which could be increased by a further £20 million, plus 15% of profits over the next four financial years - years with a loss won’t be netted off against profitable years, so customers will get the full 15% in profitable years. (Amigo had initially suggested 5% of profits over the next three financial years).
  • There would be a six-month deadline to submit a claim. But it is not yet clear when the clock for that would begin.

The scheme would lead to Amigo creating a new complaints system, yet it's unclear exactly how that would look in practice.

There are three stages Amigo's scheme needs to pass before it can proceed. The first stage is a hearing in the High Court on 30 March, which will approve a creditors' vote in April. The FCA's view can be heard by the High Court. If creditors then vote in favour of the scheme, there will then be a second court hearing to approve the scheme itself. If Amigo succeeds, it expects the scheme to be operating by "mid May". 

Here's what it means if you've an existing complaint

For now, this is what it means if you've already submitted a complaint to Amigo or to the Financial Ombudsman Service:

  • Already got an agreed payout from Amigo or had a payout ordered by the Financial Ombudsman Service? As long as the offer/order was dated before 21 December 2020 you should get the cash as normal.

  • If you have put in a complaint to Amigo but NOT been offered a payout yet, your claim will still be looked at, but all decisions (and payouts) are CURRENTLY ON HOLD. If the scheme goes ahead, your complaint will then be transferred over as part of the scheme. You don't need to do anything else, but bear in mind that you might get less as part of the scheme than you otherwise might have.

    If the scheme does not go ahead, Amigo has said it is likely to go into insolvency, and the future of your claim will be in the hands of administrators. If that happens, the timing and size of any payout will not be certain.

    You can also refer to Amigo's dedicated site set up for the proposed scheme. For any further questions, you can email or call its hotline on 01202 629798.

  • If you have escalated a complaint to the Ombudsman your complaint will be paused. Financial Ombudsman Service (FOS) said on 25 March that that it will no longer progress existing complaints and it will also not take on new complaints at this stage. Ombudsman complaints will instead be automatically passed back to Amigo if a redress scheme is agreed on.

Making a new complaint? Here's what you need to know

If you believe you have been mis-sold an Amigo loan - whether you're a past or current customer (or guarantor) - you CAN still make a new complaint and should do so ASAP. Amigo is still collecting new claims but all decisions and further processing are on hold. If the scheme goes ahead, your complaint will then be transferred over as part of the scheme. You just need to bear in mind you might get less than you otherwise will have.

The reason it's important to get your claim in ASAP is that it's best to do it while it's on your mind as people so often put things off and then don't do them. As the scheme will have a deadline, you don't want to miss it. And as we say above any claim you make now will be transferred to the scheme if it goes ahead.

If you are currently paying off an Amigo loan, but think you were mis-sold, you still need to keep up with your repayments. If not, your credit file will be affected and it is likely your guarantor will be asked to step in and make your payments. But you can make a complaint and, if the scheme goes ahead and your complaint is upheld, it is possible that some (or even all) of your outstanding balance will be written off as part of your compensation.

See our Reclaim Guarantor Loans guide for full help on how to check if you were mis-sold and our free reclaiming tool.

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