UK Lender Goes to Court With Regulator Over Compensation

Bournemouth-based, Amigo Loans, has reportedly paid more than lb50 million to former customers within the last two years, from individuals who have struggled to settle their loans due to affordability or employment. The typical customer claim could be worth thousands, which is comprised of the entire amount borrowed, repayments and 8% interest on the top.

In an effort to clear the long list of outstanding claims, Amigo has presented a redressing scheme worth lb35 million, to ‘avoid insolvency’ and with intends to recover and continue exchanging the near future.

However, despite investing in a large sum, some worthy customers may only receive 5% or 10% of their overall claim balance due – and the FCA is challenging this – especially considering that Amigo also plans to offer huge bonuses to shareholders, estimated to become worth around lb7 million overall in the near future.

The letter from the FCA to Amigo’s chief executive officers Gary Jennison said: “The FCA remains concerned that redress creditors will have their claims significantly reduced whilst other stakeholders, such as shareholders, aren't being inspired to contribute their great amount to enable the firm to remain solvent.

Dan Kettle, Director of Pheabs, commented: “Compensation claims are very tricky for lenders, just because a number of checks are performed to look for the customer’s eligibility, however the market also allows people to reclaim entirely if they cannot repay them.”

“This puts lenders inside a tricky position over who they give loan to and just how their business could be sustainable in the future. The upcoming court case for Amigo is very intriguing and should hopefully add more transparency in the market, otherwise I am unable to observe how any lenders can survive in the market later on.”

Customers happen to be able to make claims because they struggled to settle loans due to lack of income, affordability or limited checks on their guarantor. It is liberated to claim directly using the lender by submitting information that exist on their individual website or via the FCA website. Lots of people have processed their claims through Claims Management Companies who often charge hefty fees for packaging the claim and sending it towards the lender.

The lender should react to claims within 6-8 weeks and choose whether or not to uphold the claim and pay entirely, offer a partial reclaim or no claim at all. Some lenders happen to be quick to provide a settlement at a fraction from the overall value arrive at a quick solution. Those pushing for full payment happen to be able to complain through the Financial Ombudsman Service who are able to overrule any decision with a lender.

Compensation claims from the FCA have struck UK lenders very hard recently, with payday giant Wonga.com refunding over lb500 million to former customers and also over lb100 million in total refunded in the Money Shop and QuickQuid – subsequently putting the 3 well-known companies into liquidation.

Amigo are looking to avoid a similar fate, with court proceedings happening later this month.