Amigo scheme of arrangement thrown out by High Court

June 10, 2021

A scheme proposed by Amigo Loans to cap compensation payments for cases of mis-selling to nearly a million current and former customers has been thrown out by the High Court.

Customers who are successful with their complaints to the financial ombudsman usually receive redress which leaves them no better or worse off financially than if they had not received the loan (usually 100% refund of the interest on the loan is refunded). Through this scheme of arrangement, Amigo have proposed a cap on the amount paid out to customers, which by their examples, would be somewhere between 10% and 23% or even lower depending on the number of successful complaints.

Amigo have argued that without the scheme they would likely fall into administration, however this is not the view of the FCA:

“The FCA has, through its continued engagement with Amigo and participation in the Court hearing, sought to get a better, fairer deal for Amigo’s customers due redress. We believe that a fairer compromise could have been offered to customers, but was not.”  “The FCA considered it necessary in this case to share with the Court its view that the Scheme as proposed was inherently unfair, as it placed a disproportionate burden on customers, as opposed to shareholders and bondholders, to keep the company afloat.”

Critics have hit back on the scheme highlighting that five of the Amigo executives would receive long-term bonuses that combined would be worth at least £7.3m if the share price hits the target price of 40p per share in three years’ time and stays at that level until the time the awards are paid at the five-year mark:

CEO Gary Jennison: 9.5m shares (£3.8m at 40p)
Chief financial officer Mike Corcoran: 4.75m shares (£1.9m at 40p)
Chief risk officer Paul Dyer: 1.5m shares (£600,000 at 40p)
Chief transformation officer Shaminder Rai: 1.5m shares (£600,000 at 40p)
Chief restructuring officer Nicholas Beal: 1m shares (£400,000 at 40p)

The founder of MoneySavingExpert, Martin Lewis, said the regulator needed to use its powers and stand up for consumers. “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.”

Gary Jennison, Amigo’s chief executive, said the company was ‘incredibly disappointed’ that the Scheme has not been approved and stated that 95% of customers who voted supported the scheme. “We are currently reviewing all our options and will provide an update at the earliest opportunity,” he added, which might include an appeal.