Amigo’s customers approve compensation

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  • Just under 89% of Amigo creditors voted in favor of the lender’s current offer
  • Amigo Holdings specializes in lending money to people with poor credit scores
  • A court hearing on the compensation scheme is set to happen on May 23 and 24

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A plan to indemnify borrowers who were mis-sold loans by subprime lender Amigo Holdings has been overwhelmingly accepted at a creditors’ meeting.

Just under 89 per cent of customers, who hold loans worth almost £460million between them, voted in favor of the scheme on Thursday, far surpassing the threshold needed for the settlement to pass.

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Approval for the deal has already been given by the Financial Conduct Authority (FCA), but final consent is now required by the court, with a hearing set to take place on 23 and 24 May.

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Loan firm: Founded in 2005, Amigo specializes in lending money to people with poor credit scores. Its initial public offering four years ago valued the group at £1.3billion

Should the court give the thumbs up, creditors would be offered at least £112million in compensation, with £15million coming from a rights issue, though Amigo has said this could go above £116million should it raise more money than expected.

But if that does not happen, Bournemouth-based Amigo will ask the court to approve an alternative but far less generous proposal that was also supported by a massive majority of creditors on Thursday.

This would involve the company gradually closing down the business by stopping all lending, paying off all necessary expenses, then paying all surplus cash to creditors before eventually becoming liquidated.

Amigo’s chief executive Gary Jennison called yesterday’ vote ‘an important step to address the liabilities that arose from historic lending practices under previous management’.

Founded in 2005 by James Benamor, Amigo specializes in lending money to people with poor credit scores, who would only receive a loan as long as a guarantor – usually a family member or friend – could pay the bill if they were unable to do so.

Its exceptional growth culminated in an initial public offering on the London Stock Exchange in 2018, where it was valued at £1.3billion.

Proposal: Should the court approve Amigo's current compensation scheme, creditors would be offered at least £112million in compensation, with £15million coming from a rights issue

Proposal: Should the court approve Amigo’s current compensation scheme, creditors would be offered at least £112million in compensation, with £15million coming from a rights issue

Yet two years later, it suspended almost all new lending after receiving a storm of complaints from customers who believed they were given loans they could not afford to repay.

The FCA then began an investigation into whether the firm had failed to do the obligatory background checks regarding customers’ creditworthiness and its governance over that process.

Amigo did not have enough money to deal with the huge volume of complaints and initially proposed a compensation package that would that would have capped payouts at £35million and 15 per cent of its profits over four years.

Creditors voted in favor of the proposal, but the High Court resolutely rejected it, saying it felt that both current and former borrowers were not given enough information to make an informed decision.

So, over recent months, it has worked with a panel of eight random-chosen customers to design two new options that all creditors would then be able to vote on.

Although still just an estimate, the company thinks it can pay back 42p for every £1 that was owed if it can continue trading and some other conditions are met.

The other option, which was also passed in the vote, but with a lower tally, would wind down Amigo and return 29p for every £1 that it owes to customers with valid claims.

Mr Jennison said: ‘We would like to thank all those customers who took the time to make their voices heard, as well as the FCA who confirmed last month there has been a significant improvement in the scheme terms compared with Amigo’s first scheme.

‘The approval of the scheme will deliver the best possible outcome for creditors, and Amigo’s proposed return to lending will allow us to play an important role in the non-standard lending sector, at a time of unprecedented rising living costs.’

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Credit: www.dailymail.co.uk /

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