In January 2021, Amigo Loans came under fire from the Financial Conduct Authority after thousands of complaints were filed against them over the past year. The complaints were from customers who claimed they were mis-sold loans that they could never have afforded to pay back. They also received complaints from the guarantors of the loans, who were left responsible for paying back the loans that the customer could no longer afford to repay. So, how are Amigo addressing their issues and where does that leave its customers?
Who Are Amigo Loans and What Do They Do?
Amigo Loans are a company that will allow people with poor credit histories to borrow money alongside a guarantor. The guarantor, usually a friend or family member, agrees to be responsible for the repayments if the original customer fails to repay.
With the representative APR being as high as 50%, it doesn’t take long for the guarantors to have to step in. It soon became apparent that there was some issue with the affordability assessments and Amigo was forced to admit that they had some glitches in their application processes. In 2020, they began dealing with scores of affordability complaints from both the customer and the guarantor.
What Is the Current Situation with Amigo Loans?
For the past year, Amigo has been dishing out mis-selling complaint payouts and have gotten to the point where they need to find a way to avoid going bust entirely. To try and limit the payouts, Amigo applied to the High Court for permission to set out a ‘Scheme of Arrangement’.
What Is a Scheme of Arrangement?
A Scheme of Arrangement is a legally binding agreement between a company and those it may owe money to. The company must have approval from the courts even to begin the process of setting out such a scheme. Once the courts approve the scheme, the company needs to arrange for those involved to agree to it via a vote. It then requires further court approval before bringing it into effect.
Despite their application and over 74,000 creditors who voted to accept the Scheme, Amigo didn’t get the permission they had hoped from the courts for the scheme to go ahead at their hearing on 24th May 2021. Amigo have since confirmed that they will not be appealing the decision and without a scheme will have no alternative other than to enter into administration.
Whilst nothing has been confirmed, it is possible that Amigo are considering putting forward another Scheme of Arrangement to the court, on a different basis to their first one.
What Do I Do If I Owe Amigo Loans Money?
If you have an Amigo loan, you should keep making your repayments. For as long as you are in an agreement with Amigo, you must meet all of the agreed obligations, even if they do eventually go into administration. If you stop making your payments it will impact your credit score.
If you feel that you were mis-sold your loan and wish to make a complaint, you can still do so. You can use the free Reclaim Tool on Money Saving Expert’s website to begin your claim. Whilst Amigo has currently halted all of their complaints reviews and it is uncertain whether you would receive any compensation if the company does go into administration, it is likely that there will be a deadline for claims, so if you believe you have a claim it is important to submit it as soon as possible.
What Is Happening with Existing Amigo Complaints?
If you have already started a claim against Amigo Loans but haven’t received a payout yet, unfortunately there is nothing you can do other than sit tight whilst Amigo are determining their next steps.
What Will Happen If Amigo Loans Go Into Administration?
If Amigo Loans go into administration, it is possible, although not confirmed, that those who have claimed against existing loans with the company would get the claim refund deducted from their outstanding balance. The appointed administrator(s) will confirm exactly what you are required to do.
What Will Happen If a Different Scheme of Arrangement Is Approved?
If Amigo does put forward the basis of another scheme which is subsequently approved, it may take months to set up. During this time, customers with current loans should still make repayments.
If you are a customer or guarantor of an Amigo Loan and are unsure about what to do next or have been left with unmanageable debt due to the high repayments, please don’t hesitate to contact Debt Movement for friendly and impartial guidance.