Losses at subprime lender Amigo ballooned more than sevenfold over the last year as it contends with the swelling cost of repaying customers it misssold loans to.
The guarantor lender’s losses before tax increased 648 per cent compared to the same period in 2020, rising to £283.6m from £37.9m.
The widening losses were primarily driven by a £344.6m set aside for customer entitled to compensation as a result Amigo’s lending activities.
Amigo has be struggling under the weight of a wave of customers complaints seeking compensation for being missold loans.
The lender had proposed a diluted plan – or scheme of arrangement – to repay creditors, which was dismissed in a High Court ruling in May this year. It warned in June that it is at risk of insolvency if payouts to eligible creditors and customer were not capped.
Amigo is preparing to present a fresh proposal to the FCA and the High Court in which it intends to resolve issues with its previous plan.
The High Court and City watchdog noted that Amigo’s previous proposal failed to outline any credible internal controls that would ensure customer complaints would be taken seriously.
The subprime lender had delayed the publicaiton of its results after it received a letter from the FCA warning its new proposal is likely to be inadequate.
Gary Jennison, CEO of Amigo, said: “It has been an incredibly difficult year and, as a new team, we are fighting hard to address the problems of the past in order to save Amigo, compensate those customers affected.”
“The serious challenges we have faced from the high level of complaints received around historical lending primarily between 2016 and 2019, as reflected in today’s results, have left the business with a significant liability for compensation payments and put our future under threat.”
“The Board is now focused on pursuing a new Scheme of Arrangement which will seek to address the concerns raised by the High Court judge and our regulator including having a customer committee to ensure the customer’s voice is heard as we shape a new Scheme.”