UK regulator hints at potential return to lending for Amigo Loans

The Financial Conduct Authority has laid the ground for Amigo Loans to potentially resume lending, saying it will not oppose the group’s new financial plan when it is presented to court this week.

The watchdog’s decision not to intervene at this stage is an important step for the troubled payday loans company after it rejected a previous proposal, although it is only one of many barriers to a full-scale recovery.

Amigo, which lends to people with poor credit histories, will on Tuesday set out a scheme of arrangement in the High Court, making a larger offer to creditors and detailing conditions about a new business model and a return to lending.

The FCA said it would not oppose the plan but did not rule out intervening in the new scheme of arrangement in future.

It added that if the scheme was sanctioned by the court and lending conditions were met, the company could return to lending. “If the firm were to return to lending, the FCA will continue to supervise it closely,” it said.

Amigo stopped lending in November 2020, citing uncertainty surrounding the pandemic, and has been unable to resume the business as a result of a struggle over compensation for historic mis-selling.

The company has faced complaints from consumers who accused it of failing to check whether their loans were affordable.

“There still remain significant hurdles to overcome before Amigo can deal with its insolvent balance sheet but this information will help us move forward to the next stage in delivering the best outcome possible, given the circumstances,” said chief executive Gary Jennison.

Amigo’s share price soared 117 per cent in morning trading on Monday, although it is still down 80 per cent since May, when the FCA rejected an earlier proposal.

In its latest results, Amigo said the board had concluded there was material uncertainty over its future as a going concern. The company reported a pre-tax loss in the three months to December 2021 of £500,000, compared with a loss of £18.7mn a year earlier.

The new scheme would offer £97mn to creditors. It would seek to raise an additional £15mn through a rights issue for the scheme and to finance new lending.

This month, Amigo announced it had accepted a request from Jennison to cancel a 9.5mn long-term share award following criticism raised in the hearing last year.

Amigo’s struggles reflect industry-wide troubles in recent years, as the regulator has clamped down on so-called non-standard finance providers amid concerns of a cycle of debt dependency.

The number of active high-cost, short-term lenders in the UK fell by close to a third between 2016 and the third quarter of 2020, according to FCA figures.