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24 Mar 2021 | 08:43

FCA not planning to oppose Amigo rescue

(Sharecast News) - The Financial Conduct Authority is not planning to challenge Amigo's rescue plan but the regulator failed to support the scheme and said it was concerned about low compensation payments to customers. The crisis-hit company has proposed a plan that would limit redress payments to almost a million current and former customers mis-sold unaffordable loans.

Borrowers who successfully complain to the financial ombudsman usually receive are usually refunded all the interest they were charged plus other charges. But Amigo has asked a court to cap the amount it pays, meaning consumers could get significantly less.

The company said: "The FCA notified Amigo and SchemeCo after market close 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."

Amigo shares jumped 13.5% to 14.6p at 09:10 GMT. The shares have plunged from 276p in June 2019 as the company's troubles have mounted.

Amigo, a subprime lender whose loans are guaranteed by the borrower's family or friends, has said it will go bust if the plan does not go through. The company has been in a state of crisis for almost two years after a regulatory clampdown and a torrent of compensation claims threatened its viability.

The FCA said the plan may not be compatible with its rules, principles and objectives. The regulator said it was concerned that customers with valid claims would receive reduced payments and about the methods used to assess claims. The FCA has pointed these concerns out to Amigo and will alert the court to its misgivings.

Gary Jennison, Amigo's chief executive, said: "[The FCA's] letter is a significant step forward ahead of the first court hearing next week. We look forward to our customers having an opportunity to vote and support the scheme, which after careful consideration, we believe, is the only real option for customers who are due redress to receive cash compensation.

"We are seeing significant pent up demand for loans from those who are unable to easily get credit from mainstream finance. It is vital that these millions of UK adults are able to access credit from, regulated business such as Amigo, rather than less reputable alternatives."

The plan is opposed by campaigners including Martin Lewis, the founder of MoneySavingExpert, and Labour MP Stella Creasy. The Guardian reported on 18 March the FCA was preparing to tell the court it had reservations about Amigo's plan and it was not clear whether the regulator would oppose it.
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