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Amigo Holdings PLC updates
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Amigo loan warned Monday that it was struggling to cope with a rising barrage of customer complaints, forcing it to postpone its full year results and allocate more money to deal with the backlog.
The company’s shares fell 25 percent to a new record low following the announcement, bringing its market capitalization to just £ 35 million – less than the amount expected to resolve the complaints.
Last month, the sub-prime lender reached an agreement with the Financial Conduct Authority that would require around 9,000 customer complaints to be answered by the end of this week. However, on Monday, Amigo reported a “significant increase in the rate of complaints” and said it was in talks with the regulator to extend their agreement.
Amigo dominates the surety loan market, providing cash to people with poor credit ratings when friends or family are willing to step in if they don’t repay. The FCA is investigating Whether the approach to verifying that customers can afford to pay back their loans since 2018 is in line with UK credit regulations.
The investigation began after Amigo founder James Benamor accused the company’s board of directors of recklessly issuing new loans on the same terms that had previously led to complaints of “irresponsible lending”.
Mr Benamor’s struggle with Amigo’s new management culminated in an unsuccessful attempt by him drop the entire board last week. The 43-year-old then said that he would sell his 61 percent stake in the company.
Amigo went up for sale earlier this year and was in talks with an undisclosed company about a possible £ 100m deal, but the Buyers withdrew this month, blaming the “current market environment”.
Goodbody analyst John Cronin said the recent surge in complaints has likely been driven by professional claims management firms. “Although there are opportunities to find a solution or a deal with the regulator in the event of a complaint, there is currently no end in sight to the subject,” he said.
Amigo said it would “continue to evaluate each complaint on a case-by-case basis to ensure fair results for our customers,” but said it would come back on top of the £ 35million announced for handling the initial “material” cost. The company announced that it would release its annual results by July 23, compared to its previous goal of reporting by the end of June.
Amigo’s shares, which were trading at 275p each two years ago, have fallen 89 percent to 7p per share since the start of the year.
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