LONDON (ShareCast) - (Sharecast News) - Amigo shares fell by a fifth after founder James Benamor accused it of "committing slow-motion suicide" by continuing to lend irresponsibly while paying out refunds on past loans.
Benamor, who owns a majority of the guarantor loans provider, quit as a director on Wednesday after using his stake to force his way back onto the board in December. Benamor founded Amigo in 2005 and was chief executive until 2016.

He said that after returning as a director he audited recently lent and funded loans and found that almost all loans matched the company's definition of "irresponsible" following a regulatory crackdown. Presented with evidence the board did not take adequate action, he said.

"During my short time back on the Amigo board, I have witnessed a company committing slow-motion suicide," Benamor said on social media. "Within one year of my stepping down from the board, the most efficient company in the FTSE 250 had become a cash cow for consultants, lawyers and suits, all of whom had an interest in keeping the gravy train running for as long as possible, but no interest in the company being honest with shareholders or customers about the situation it was in."

Amigo shares fell more than 20% in early trading and were down 15.8% to 34.15p at 09:50 GMT. The shares have lost almost 90% of their value since June 2019.

The company, backed by fallen star investor Neil Woodford, floated on the stock market in 2018 and became a member of the FTSE 250 before dropping out of the index in September.

Amigo put itself up for sale in January after regulators introduced tougher standards and customer complaints rose sharply. The company is the biggest provider of guarantor loans with repayments backed by the borrower's friends or family. It charges a representative interest rate of 49.9% on loans between £500 and £10,000.

Benamor said the Financial Ombudsman Service changed its rules in 2019 so that a borrower living beyond their means became a reason to refund all interest payments dating back to 2010. This change resulted in the ombudsman upholding 90% of complaints about guarantor loans in 2019.

Amigo should have contested the ombudsman's decisions in court, based on many years of responsible lending, or told shareholders about the problem, made a provision of more than £1bn and gone into administration, Benamor said.

"Instead, they began refunding almost all complaints received, but continued to lend on a virtually unaltered basis, hoping no one would notice," Benamor said. "They must immediately cease lending, collect in the book, pay down debt, and proceed directly to judicial review."

Amigo said Benamor's statement contained "material inaccuracies" including that he opposed the proposed sale.

"Amigo rejects Mr Benamor's binary analysis that Amigo either must take the Financial Ombudsman Service to a judicial review or that it has a systemic problem with its loan book," Amigo said. It stuck by the £18.7m complaints provision in its third quarter results and said the accounts were approved by the board including Benamor.

The company said the ombudsman's approach "evolved" in 2019 but it did not tell Amigo about a specific change. "The FOS [ombudsman] continues to determine complaints on a case-by-case basis and Amigo responds accordingly," Amigo said.

"Notwithstanding the potential disruption to the company's formal sale process and strategic review, the company intends to continue with the process."

Shore Capital analyst Gary Greenwood withdrew his 'hold' rating on Amigo shares and said he expected to scrap coverage of the company because it was impossible to know what was going on.

"We have been openly cautious about the investment case for Amigo for some time but, given such a conflict of opinions by parties much closer to the business than us, we believe that it is no longer possible to confidently take an objective view of the company's prospects from an external perspective" Greenwood said.

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