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.
How to trade stocks with IG
- Create an IG trading account or log in to your existing account
- Enter ‘Amigo Holdings PLC’ in the search bar and select it
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.