Amigo Loans shares could fall further over mis-selling customer claims
The beleaguered sub-prime lender has paused new loans until 2021 after its share price crashed as angry customer demand compensation of mis-selling claims.
- Amigo Loans shares plunge 22% after customers demand compensation over mis-selling
- The sub-prime lender could see £85 million worth of profits wiped off its balance sheet
- Amigo Loans pausing new lending until 2021
Amigo Loans saw its share price tumble more than 22% on Tuesday after the company admitted that it has received so many complaints from customers demanding compensation over mis-selling that it threaten to wipe away £85 million in profits off its balance sheet.
So far, the sub-prime lender has received more than 25,500 customer complaints and have been warned by the Financial Conduct Authority (FCA) that it must respond to all outstanding claims within eight weeks from 30 October.
‘We have continued to increase our internal resource capacity to manage the volumes and we are taking a robust approach to dealing with the CMCs, including reporting our concerns about the behaviour of specific firms to the FCA,’ Amigo Loans said.
Amigo Loans closed at 6p per share on Tuesday, with the stock down 90% year-to-date.
Amigo warns of ‘material uncertainty’ over its ability to operate
The mounting cost of rising customer complaints, fuelled by the coronavirus pandemic, forced Amigo Loans to put the majority of its new lending on hold earlier this year and in July the company warned that there was ‘material uncertainty’ over its ability to operate.
‘Amigo has reviewed and reached a decision on all cases included in the complaints voluntary requirement we agreed with our regulator,’ Amigo Loans CEO Gary Jennison said.
‘It is a testament to the efforts of the whole team that this has been achieved by the end of October, notwithstanding the circa 10% of cases that have a specific, known reason why they have yet to receive their final response from Amigo,’ he added.
Amigo Loans pauses new lending until 2021
In the three months to September, Amigo Loans had already paid £47 million worth of compensation to customers, of which approximately 60% was settled by cash payments, and the remaining amount dealt with through loan balance adjustments.
Now, with customer complaints rising to new highs, the sub-prime lender is once again forced to halt new loans being issued until 2021, which will place the company under considerable pressure and once again leave investors concerned about whether it will survive the economic impact of Covid-19.
‘Given the low volumes currently being lent to key workers and owing to the challenges being presented by the imminent second lockdown, we have decided to focus our resources on collections and complaint until we return to more meaningful levels of lending in 2021,’ Amigo Loans said in a statement.
Amigo Loans will unveil its half-year results on 26 November.
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