Amigo Loans gets extension until December from its own lenders

Amigo Loans gets another extension until December from its own lenders on £250m finance deal

  • The new deal will reduce the facility’s size from £300m to £250m 
  • Amigo says the waiver extension will help it understand the impact of Covid-19 
  • Amigo must clear thousands of complaints before watchdog’s October deadline

Lenders to Amigo Loans have granted the struggling firm a four-month extension to meet the terms of its multi-million pound finance facility.

Britain’s largest guarantor lender now has until December 18 – a week before Christmas – to ensure that it is within the terms.

It’s not the first time Amigo Loans has been given this leniency by its lenders. The lifeline extends the deadline, which was meant to run out last Friday after originally being extended for a few weeks.

Amigo Loans offers loans at a representative APR of close to 50% - and if a borrower can't pay then a friend or family member needs to foot the bill instead

Amigo Loans offers loans at a representative APR of close to 50% – and if a borrower can’t pay then a friend or family member needs to foot the bill instead

Amigo Loans said: ‘This follows the announcement on 27 July 2020 extending the waiver period to 14 August 2020 and allows both Amigo and its lenders the opportunity to fully understand the impact of Covid-19 on the business, whilst maintaining the existing facility.’

It is understood that the performance triggers of the securitisation facility were affected after a number of Amigo Loans’ customers appealed to the lender to strike forbearance agreements, which could involve suspension of payments for up to six months, in line with the guidance of Financial Conduct Authority (FCA). 

The waiver from Amigo’s lenders has in turn been introduced to cover the increase in forbearance agreements, which escalated as customers faced financial difficulties during lockdown imposed by Covid-19 restrictions. 

The new deal will also reduce the facility’s size from £300 million to £250 million. Amigo Loans said this reduction reflected its current lower funding requirements while lending to consumers is paused.

During lockdown the FCA stepped in to ask Amigo Loans, and other lenders, to support customers through the Covid-19 pandemic. But while borrowers have been offered a pause in repayments lenders are still able to charge interest.

Amigo Loans added: ‘All cash generation arising from customer loans held within the facility will continue to be used during the waiver period extension to further reduce the outstanding balance. As of the date of renewal, the facility was drawn at £199 million.’

Last month Amigo said there was ‘material uncertainty’ that the company could continue trading as a going concern.

However, on Monday the lender delivered a more positive statement. It said: ‘Amigo has adequate liquidity to continue to fund operations and support its customers, with close to £145 million unrestricted cash held as at July 31.’

The company is currently working through a backlog of thousands of complaints to ensure it is within FCA rules, which it has till the end of October to clear. The watchdog had originally given the company until June 26 to work through its backlog.

The Financial Ombudsman Service has recorded a steady increase in complaints about Amigo – 94 per cent of which were upheld in the second half of 2019.

The company said it would provide an update on its handling of complaints when it announces its results at the end of August.  

Last year, 317 new complaints were recorded between July and December 2019 – a 349 per cent increase from the 69 complaints recorded in the second half of 2016.

The company is also locked in a row with its founder and majority owner, James Benamor, who in March accused the lender of ‘refunding almost all complaints received’ since 2019, but continuing ‘to lend on a virtually unaltered basis, hoping no one would notice.’ 

Number of new Financial Ombudsman Service complaints about Amigo Loans
Six-month period  Number of new complaints 
H1 2016 53
H2 2016  69 
H1 2017  74 
H2 2017  80 
H1 2018  117 
H2 2018  231 
H1 2019  266 
H2 2019  317 
Source: Financial Ombudsman Service 

source: dailymail.co.uk