Lender Amigo Loans has pushed ahead with plans to cap compensation payments to its creditors after the Supreme Court rejected claims that a proposed scheme would unfairly harm nearly 1 million customers. The regulator, the Financial Conduct Authority (FSA), has objected to the controversial deal, which saw some customers mis-sold to receive compensation payments of up to £1.5 million, which Amigos caps in its remuneration pool.
Amigo stated “The FCA has a lot of questions to answer about how it regulates firms like ours and whether it is fulfilling its duty to protect consumers.”
Amigo directors, some of whom received long-term bonuses in the excess of over $7 million under the Amigo deal, welcomed the court’s decision.
Founded in 2005 and made famous after the death of Wonga in 2018, Amigo has been inundated with false claims from customers accusing the company of failing to carry out basic financial controls. Amigo creditors owe 10 million pesos, and the Financial Ombudsman ruled that about 1,100 cases had been thoroughly investigated.
McFadden said Amigo had managed to cleverly avoid compensation payments through this mechanism and set a precedent for other companies in similar situations. McFadden warned that other high-cost lenders could take advantage of the decision, which is backed by the FCA, by saying the court would regulate the lender if it approved the deal.
It could follow in the footsteps of other lenders struggling with compensation claims, and some have already proposed deals similar to Amigo’s.
The company’s share price has risen 50 per cent to 16p since it was revealed last week that the FCA would not oppose the deal. Amigo warned that if creditors and customers do not agree to the rescue, they will file an administrative application and their “significant liabilities” will be excluded from any mis-selling – sale or sale of the payments made. The court heard that it did not support the programme and is not currently planning any further action.
Gary Jennison, chief executive of Amigo, said: “We are pleased that the court has agreed to continue the programme. We look forward to our customers having the opportunity to vote on whether they support the system that we believe is best suited to embed into our system so that they receive a cash reward. The court heard that it had estimated compensation at 10% of the average claim and that rejected applications had been subject to further review, it said. The company had heard that claims were assessed using an algorithm and that every rejected application was subject to further review.
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