Amigo loan customers accept “lowball” compensation offer but FCA still opposes plan

·2 min read
<p>Amigo loans were aimed at those unable to afford conventional loans</p> (PA Wire)

Amigo loans were aimed at those unable to afford conventional loans

(PA Wire)

Investors in Amigo, the high interest loans company brought to the brink of collapse due to claims for compensation for misselling, said a vast majority of customers have voted in favour of its plan to pay them lower compensation than they should have got.

Amigo has told its largely financially impoverished customers that it cannot afford to meet all the compensation costs in full and has sought permission from them through a court to pay up a smaller amount than they are entitled to.

The alternative, it has said, is that it goes bust without paying up at all.

The Financial Conduct Authority regulator has strongly opposed the scheme, saying that, while creditors sacrifice what they deserve, shareholders in Amigo sacrifice nothing.

The FCA also criticises how the scheme was imposed on creditors without their having any say in the negotiation beyond a blank yes or no vote.

Last night, the City watchdog wrote to Amigo to say it would oppose it in court when it goes to be sanctioned by a judge.

For the Scheme of Arrangement to pass, more than 50% of creditors voting must cast their votes in favour of the offer, with the total value of their claims making up at least 75% of the value of the claims.

The closing date for online voting was last night, while a creditor meeting is to be held tomorrow.

The court hearing to sanction the scheme will be held on 19 May, where the FCA will oppose it even if creditors give it their blessing.

The FCA argues that the court “cannot be satisfied” the scheme is fair in its current form.

Amigo is one of several high cost lenders to have been brought to the brink by mis-selling claims.

Only yesterday, Provident Financial said it would wind up its high interest lending operation. It is also planning a scheme of arrangement.

Amigo specialised in so-called guarantor loans, where people with bad credit histories get friends or family members to act as guarantors to make the repayments if they can’t afford them.

The companies claim they are being retrospectively judged for previous sales methods on rules which did not exist at the time.

Customers say the lenders paid too little attention to whether they could afford their loans.

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