REG - Financial Conduct - FCA censures Amigo

Amigo HoldingsAnnouncement

14/02/2023 08:15

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230214:nRSN8436Pa&default-theme=true

RNS Number : 8436P  Financial Conduct Authority  14 February 2023

FCA censures Amigo for failing to conduct adequate affordability checks

 

The Financial Conduct Authority (FCA) has publicly censured Amigo Loans Ltd
(Amigo) for failing to conduct adequate affordability checks on borrowers and
guarantors.

 

The FCA would have imposed a fine of £72,900,000, however Amigo demonstrated
that this would cause it serious financial hardship. A fine would also have
threatened Amigo's ability to meet its commitments to a High Court-sanctioned
scheme of arrangement, which aims to pay redress to customers.

 

Between 1 November 2018 and 31 March 2020, Amigo did not have appropriate
processes in place to ensure it adequately assessed borrower and guarantor
circumstances before approving a loan. Amigo's failures led to a high risk of
consumer harm, both to borrowers and guarantors.

 

Mark Steward, Executive Director of Enforcement and Market Oversight at the
FCA, said:

 

"Amigo failed to assess properly the affordability of its lending, especially
to vulnerable consumers, as our rules required. This led to lending that was
unaffordable for some and meant guarantors had to step in. It also had the
effect of prioritising the firm's commercial interests over the obligation to
comply with the rules and safeguard customers from unaffordable loans.

 

"The firm proposed a scheme of arrangement as Amigo could not afford the
sizable redress bill in full.  Following intervention by the FCA, the scheme
was ultimately approved by the creditors, including the affected customers,
and by the Court. The scheme aims to ensure an amount of redress is paid to
affected customers that is better for customers, in these parlous
circumstances, than any other likely outcome."

 

Amigo provides guarantor loans aimed at consumers who may be unable to access
finance from traditional lenders, due to their circumstances or credit
history.

 

Guarantor lending means the person applying for the loan is required to have
another person, typically a family member or friend, guarantee that if the
borrower is unable to make a repayment for the loan, the guarantor will make
that payment on the borrower's behalf. Both borrowers and guarantors needed to
pass Amigo's affordability checks for a loan to be approved.

 

Amigo's assessment of whether a customer could afford to borrow was
inadequate. Amigo's lending decisions relied heavily on the use of a complex
IT system with a high degree of automation.  However, design issues and
insufficient controls meant that the IT system processed loan applications in
circumstances where it was potentially unaffordable for the customer. Although
the system raised flags for manual review in some instances, often staff did
not sufficiently consider information provided by customers or probe the
information they were given before approving a loan.

 

These issues were made worse by a failure by Amigo to adequately consider
regulatory requirements around affordability and act sufficiently on the
findings of a number of internal and external reviews, which identified
weaknesses in its approach to the assessment of affordability and
creditworthiness.

 

These failings meant there was an increased risk that guarantors would have to
step in. The FCA found that 1 in 4 of Amigo's guarantors were asked to step in
and make payments to assist struggling borrowers at some point during the term
of the loan.

 

The FCA investigation also found that Amigo had failed to maintain adequate
records of its historic business processes. As a result, on repeated occasions
during the investigation, it was unable to provide adequate responses to
questions. It also negligently deleted the email accounts of former staff
members which hampered the FCA's investigation.

 

 Notes to editors:

 

·      Final notice
(https://www.fca.org.uk/publication/final-notices/amigo-loans-ltd-2023.pdf)

·      On 23 May 2022 the High Court approved Amigo's scheme of
arrangement (the "Scheme") to provide redress to customers who were mis-sold
loans and who raised a claim by 26 November 2022. The FCA made clear to Amigo
that it needed to provide the best possible outcome for customers in seeking
to limit its liabilities through the Scheme. This would need to include the
maximum amount of funding possible to meet compensation claims by customers.
Amigo's Scheme is intended to provide creditors with appropriate redress and
more than they would receive if the firm was to go into administration.

·      Amigo is currently undertaking a Scheme of Arrangement. More
details can be found here: https://www.amigoscheme.co.uk/
(https://www.amigoscheme.co.uk/)

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  IRSQZLBFXLLLBBB