Campaigners have called on the government and Financial Conduct Authority to block a rescue plan for Amigo they say would enrich its directors while denying poor borrowers up to £1bn of compensation, according to a report.
Martin Lewis, the founder of MoneySavingExpert, and Labour MP Stella Creasy oppose the deal, which would limit redress payments to almost a million current and former customers mis-sold unaffordable loans by Amigo, the Guardian said.
Borrowers who successfully complain to the financial ombudsman usually receive a 100% refund of the interest they were charged plus extra interest on those charges. But Amigo has asked a court to cap the amount it pays, meaning consumers could get significantly less.
The arrangement would give five Amigo directors stock options that would be worth at least £7.3m in three years’ time depending on the company’s share price.
Lewis told the Guardian: “I would call on the FCA to intervene, to make sure a fair and proportionate balance of the money available from Amigo for redress is given back to customers, who have often had their lives made very difficult by being mis-sold hideous, over-expensive loans.”
The Guardian said the FCA was preparing to tell the court it has reservations about the plan but that it was not clear if the regulator would call for it to be scrapped. Amigo shares fell 3.9% to 10.77p at 11:49 GMT.
Amigo, a subprime lender whose loans are guaranteed by the borrower’s family or friends, has said it will go bust if the plan does not go through. The company has been in a state of crisis for almost two years after a regulatory clampdown and a torrent of compensation claims threatened its viability.
Creasy, a longtime campaigner for vulnerable borrowers, said if the deal was approved it would “set a precedent that it is OK for a company to go bust and not repay consumers, but make sure that it looks after its shareholders and bondholders”.
