Amigo publicly censured for failing to conduct adequate affordability checks

The subprime lender has however avoided a £72.9m fine as the firm demonstrated such a fine would cause serious financial hardship. It would have also threatened Amigo’s ability to meet its commitments to the high court-sanctioned scheme of arrangement, which aims to pay redress to customers – something that formed part of the firm’s scheme of arrangement.   

It follows an investigation into Amigo’s practices between 1 November 2018 and 31 March 2020, after which the FCA concluded the firm did not have appropriate processes in place ensure it adequately assessed borrower and guarantor circumstances before approving a loan. This failure, according to the regulator, led to a high risk of consumer harm – both to borrowers and guarantors.  

It also found its lending decisions relied heavily on the use of a complex IT system with a high degree of automation – however design issues and insufficient controls meant it processed loan applications in circumstances where it was potentially unaffordable for the customers.  

Additionally, although the system raised flags for manual review in some instances, the FCA found that staff often didn’t consider information by customers or probe the information they were given before approving loans.  

These issues were then made worse by Amigo’s failure to adequately consider regulatory requirements around affordability and act sufficiently on the findings of a number of internal and external reviews, which identified weaknesses in its approach to the assessment of affordability and creditworthiness.  

The failings meant there was an increased risk guarantors would have to step in – with the FCA finding one in four of Amigo’s guarantors were asked to step in and make payments to assist struggling borrowers at some point during the term of the loan.  

Over the course of its investigation the FCA also found the firm had failed to maintain adequate records of its historic business processes resulting in it being unable to provide adequate responses to questions on repeated occasions during the investigation. Additionally, it negligently deleted the email accounts of former staff members, hampering the regulator’s investigation.  

The FCA’s executive director of enforcement and market oversight Mark Steward said: “Amigo failed to assess properly the affordability of its lending, especially to vulnerable consumers, as our rules required. This led to lending that was unaffordable for some and meant guarantors had to step in.  

“It also had the effect of prioritising the firm’s commercial interests over the obligation to comply with the rules and safeguard customers from unaffordable loans. The firm proposed a scheme of arrangement as Amigo could not afford the sizable redress bill in full.   

“Following intervention by the FCA, the scheme was ultimately approved by the creditors, including the affected customers, and by the Court. The scheme aims to ensure an amount of redress is paid to affected customers that is better for customers, in these parlous circumstances, than any other likely outcome.” 

In response, Amigo said its new board and management cooperated with the FCA’s investigation, adding that since the enforcement action began in 2020 the company’s board has completely changed and the senior management substantially refreshed by the engagement of subject matter experts.  

This approach has “allowed Amigo to reflect on past behaviours and develop its new business proposition”.  

Commenting on the news, Amigo’s chief executive Danny Malone said: “I would like to apologise again to any customers impacted for the past failings in lending practises that occurred during the period 2018-2020.   

“As a new Board and management team, we fully accept the lessons that needed to be learnt for the future and our focus remains on rebuilding a business that delivers better outcomes for customers, backed by stronger lending controls and a better culture.   

“The FCA’s decision in October 2022 to allow Amigo to return to lending on a pilot basis reflects the significant change that has been undertaken in the business, and we would like to thank the FCA for working constructively with us. The conclusion of this investigation enables us to draw a line under these historic lending issues as we seek to secure the capital required for the future.”