High Court allows troubled Amigo Loans to cap compensation payments | Consumer rights

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High-cost lender Amigo Loans to continue efforts a rescue plan to cap compensation payments for nearly a million customers after the High Court dismissed fears the proposed scheme would harm them unfairly.

Amigo, who is giving directors the opportunity to earn £ 7million in long-term bonuses under the deal, said he welcomed the court ruling, which would allow a meeting with creditors on May 12 to go as planned, followed by a vote. of all customers.

The controversial agreement was not opposed by the regulator, the Financial Conduct Authority, despite concerns that mis-sold customers could receive just over 5% of a successful claim after Amigo capped its compensation pool to a maximum of £ 35million and 15% profits over the next four years.

On weekends, Shadow City Minister Pat McFadden, and the head of the Treasury Select Committee, Mel Stride, said that FCA had questions to answer about how it regulated companies like Amigo and whether it was fulfilling its obligation to protect consumers.

Amigo, which was founded in 2005, but rose to prominence after the demise of the subprime rival Wonga in 2018, was inundated with abuse claims last year after customers accused the company of failing to perform basic financial checks.

The financial ombudsman service found in favor of clients in 88% of some 1,100 cases which has undergone a full review and is owed £ 10million by Amigo as a creditor.

McFadden warned that other high-cost lenders could exploit the FCA’s decision to pull out of telling the court it would not regulate the lender even if the court approves the deal.

“If Amigo is able to avoid repair payments through this mechanism, there is a risk that it will set a precedent for other companies in a similar position,” said McFadden. “And of course, people will be appalled if ordinary borrowers run out of currency while those at the top of the business receive large payments.”

The consumer credit division of home lender Provident Financial has already offered a deal similar to Amigo’s, and other high-cost lenders struggling to keep up with claims may follow suit.

The court heard that the FCA did not support the program, but “there is no current plan to take any further action.” Since we learned last week that the FCA would not oppose the deal, the company’s share price increased by 50% to 16p.

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Amigo warned that unless creditors and customers agree to save him, he will file an administration request and his significant responsibilities will rule out any improper payments made.

The court heard that Amigo would assess the claims using an algorithm and those that were rejected would be subject to further scrutiny. It was estimated that compensation would represent 10% of average claims, the court was told.

Gary Jennison, Managing Director of Amigo, said: “We are delighted that the court has accepted the project to continue. We look forward to our customers having the opportunity to vote and support the program, which we believe is the only real option for customers who are entitled to redress to receive cash compensation.

“Since it is in their best interests and the real alternative is insolvency, we strongly encourage our 700,000 former clients and 300,000 current clients to vote for their money and support the program.”

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