A HUGE guarantor lender has been slammed by the financial regulator for giving customers unaffordable credit.

Amigo Loans has been censured by the Financial Conduct Authority (FCA) for failing to carry out proper affordability checks on borrowers and their guarantors.

But the regulator has stopped short of imposing a £73 million fine on Amigo due to its financial troubles.

The FCA said it would have imposed the fine on Amigo, but said this would have caused the lender "serious financial hardship."

It added that a penalty would have threatened Amigo’s ability to pay out compensation to customers under a High Court-sanctioned scheme of arrangement.

But Sara Williams, founder of Debt Camel feels that the FCA's stern words have done little to help.

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She said: "The scale of this fine reflects the appalling behaviour of Amigo – misselling loans on a large scale for years.

"So why is the FCA allowing them to continue in business? Why did the FCA not act to prevent this massive consumer harm much earlier?

"And why has the FCA not stepped in to halt the sale of guarantor loans, which are a dangerous product aimed at people in financial difficulty?"

The FCA said that Amigo failed to have proper processes in place to assess the affordability of borrowers and those who act as their guarantors to repay.

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This led to a "high risk of consumer harm, both to borrowers and guarantors," according to the FCA.

Mark Steward, executive director of enforcement and market oversight at the FCA, 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.

Following the FCA's findings Amigo proposed a scheme of arrangement because it could not afford to pay out the compensation owed in full. 

Court hearings took place on May 23, 2022 to approve the redress scheme.

Affected customers could then make claims to the Amigo until 26 November, 2022 – but that date has now passed and it is now too late to make a claim.

Amigo is currently assessing which claims will be upheld and final decisions should come in the first half of 2023.

It's expected that Amigo will then start paying out any compensation owed in the second half of this year.

But most claims will be about affordability.

Sara Williams said: "An Amigo loan is only affordable for the borrower if at the time the loan was given, the borrower was likely to be able to make all the repayments necessary and still be able to pay their other debts, bills and living expenses, without having to borrow my more.

"Many people will have been desperate to protect their guarantor so they may have got payday loans, increase their credit cards or got behind with bills in order to pay Amigo.

"So even though the Amigo loan was repaid on time, it may still have been unaffordable."

If a borrower wins their claim when that time comes, they will be given back a proportion of any interest they had paid which could be up to 41%.

The loans company was founded in 2005, offering loans of up to £10,000 over 12 to 60 months at an interest rate of 49.9% to borrowers typically turned away from traditional lenders.

Amigo provides guarantor loans and lends to those with poor credit histories as long as a friend or family member agrees to make repayments if they can't – these being the guarantor.

But in March 2020, the firm's founder claimed customers had been given "irresponsible" loans.

If you're still paying off your debts, you can still complain if you're finding it hard to pay the money pack.

To make a complaint to Amigo, you should get in touch as soon as possible.

Send a short email to [email protected]  with COMPLAINT as the subject.

It comes after four million Provident, Greenwood and Satsuma payday and doorstop loan customers were urged to apply for compensation last year.

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Customers who were mis-sold loans at unaffordable rates had until February 28, 2022 to claim a share of a £50million compensation pot.

Thousands of 247Moneybox customers were also due compensation last year.

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