LONDON (ShareCast) - (Sharecast News) - Troubled sub-prime lender Amigo Holdings on Monday put forward a proposal that would see borrowers who believe they have been mis-sold loans receive capped payouts.
The proposal involves the company setting aside a compensation pool of £15m - £35m. Amigo last month said it had had to increase its provision for customer complaints over mis-selling and that it won't resume lending until 2021.

The company, which lends to people with bad credit histories if they provide a guarantor, said it expects the provision for complaints to rise to more than £150m from £116.4m in the first quarter, leading to a profit & loss charge of more than £85m. It cited an increase in complaints received, mainly from claims management companies.

Amigo was found by the Financial Conduct Authority to have failed to properly evaluate whether customers were able to afford their loans. As a result, the FCA banned the company from paying dividends to directors and ordered it to deal with all compensation claims by the end of October.

A total of 25,571 complaints were included in the FCA ruling. Amigo has 150,000 current customers, and 500,000 past customers.

Those who have already been informed in a letter how much compensation they will receive will still receive a payout. However, under Amigo's company's proposals, any unfinished or subsequent complaints would be capped, with the option of having their existing debt reduced, or - for previous customers - receive a share from the compensation pot.

Amigo said the proposal would allow it to start lending again in early 2021.

"Whilst the directors consider that Amigo has adequate liquidity for the medium term, they believe that without the scheme the level of redress claims would jeopardise the group's future," the company said in a statement.

Email this article to a friend

or share it with one of these popular networks:

• DIGG
• FACEBOOK
• STUMBLEUPON
• MIXX
• YAHOO BUZZ
• DELICIOUS
• REDDIT
• NEWSVINE