Subprime lender Amigo, which suspended new loans after the coronavirus outbreak, has struggled to cope with an avalanche of customer complaints and has said it will only offer loans next year.
The company had received 25,571 customer complaints about a range of issues and had been tasked by the Financial Conduct Authority to deal with them within eight weeks, as of October 30. Amigo said he has reviewed and made a decision on all complaints, but has yet to give final responses to customers out of 2,517.
Of these, 2,209 relate to complaints about large guarantor payments on a loan. Amigo was founded in 2005 and is the UK’s largest provider of secured loans. He uses friends and family to guarantee loan repayment for people who cannot borrow from traditional lenders due to their credit history.
The company said it took a milestone in handling complaints, but admitted the number stayed at a high level for longer than expected. After a strong increase, notably through the claims management companies, its claims provision will rise from £ 116.4m in the first quarter to over £ 150m.
In the three months to the end of September, Amigo paid around £ 47million in compensation to clients – 60% in cash and the rest via loan balance adjustments.
The city watchdog is also investigating how Amigo, which provides secured loans at an annual interest rate of 49.9%, assessed clients’ creditworthiness.
The company 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 customers. Therefore, its profits fell to £ 3million in the three months to June 30, its first quarter, compared to £ 18.1million in the same period last year.
As he was not lending much to key workers and due to the challenges of the impending second foreclosure, Amigo decided to focus on collecting money owed and handling complaints, and reverting to loans next year.
Gary Jennison, who became Managing Director of Amigo in September, said: “We will be lending again to our clients who need to access an Amigo loan as soon as possible, but don’t envision it being until 2021. . “