Storm clouds appear to be looming over Amigo Loans’ owner Amigo Holdings PLC (LON: AMGO). The UK’s largest provider of guarantor loans has been forced to row back on suggestions that The Financial Conduct Authority (FCA) had given its business the all-clear.
Following an intervention on Wednesday, the company founded in 2005. was forced to correct a statement it had previously issued in which Amigo Holdings reassured investors over the outcome of an FCA review into the lucrative but sometimes predatory guarantor loans industry.
The Financial Conduct Authority revealed the outcome of its Guarantor Understanding Multi Firm (GUMF) review. The company which reported net income of £50.6 million from £210.8 million profit in 2018, was ordered to explain more carefully the risks that people are taking on when they agree to guarantee a loan for a family member or friend.
Amigo Holdings initially insisted that the regulator had not raised any concern about its main product or its business model. However, it was forced to correct its comments shortly afterward. The company which issues unsecured personal loans of between £500 and £10,000 with annual interest rates of 49.9% to people who otherwise have difficulty accessing credit, was forced to clarify that the FCA’s work was not intended to examine its business model or the loans. A spokesperson for Amigo Holdings (LON: AMGO) said:
“The review focused on the information made available to potential guarantors and how sufficient this is to ensure potential guarantors reach an informed decision ahead of becoming a guarantor.”
Amigo Holdings
What’s Next for Amigo Holdings?
It feels as though it is crunch time for Amigo Holdings PLC (LON: AMGO). Its share price has more than halved in August after the company reported an increase in the number of bad debts. it also revealed that it had earmarked more cash for Amigo loans complaints whilst warning that loan growth should slow down to a standstill following a crackdown by regulatory authorities.
In October, Amigo Holdings was forced to beg for breathing space after the number of company shares in public hands fell below a required threshold. Once the so-called free float fell to 21.2%, below the required 25% minimum, Amigo had to go cap in hand to The Financial Conduct Authority (FCA).
The sub-prime lender went public last July and entered the FTSE 250 in September, valuing the company at over £1.3 billion. However, since then it has been dogged by a large number of complaints and criticisms. Their ‘pilot loans scheme’ has drawn particular ire due to their high-risk profile.
The next few months look crucial to Amigo Loans as regulatory vultures continue to circle. The latest backdown will not do them any favours.
