Amigo Loans is planning to offer new products after the UK subprime-focused company was forced to pause lending following a deluge of complaints.
The Bournemouth-based business is aiming to launch two lending products, a personal loan and a guarantor loan, under a new brand, RewardRate. Borrowers will have the opportunity to reduce their annual interest rate by up to 15 percentage points.
The plan is subject to the Financial Conduct Authority giving Amigo consent to return to lending, after it halted in November 2020 following a backlog of complaints and uncertainty caused by the pandemic.
“We’re getting good engagement with the FCA,” said chief executive Gary Jennison. “There’s a long list of things we need to satisfy them, but it’s hopefully not much longer.”
The return to lending comes after Amigo warned last year that it could go bust unless it was able to resume business. Amigo, which lends to people with poor credit histories, was hit with complaints from borrowers who said it failed to properly check whether the loans were affordable.
Shares in Amigo rose by as much as 19 per cent in early trading on Tuesday.
Amigo is planning to offer a personal loan that starts with an a 49.9 per cent annual percentage rate, while the guarantor loan begins at 39.9 per cent.
Both products will give borrowers the opportunity to reduce the interest rate to 34.9 per cent APR by making payments on time. Customers can also freeze a payment once a year, with no penalties.
Amigo said loans originated before March 2020 would not be sold again, with the legacy book continuing to run off. It will cap net new lending at £35mn before completing a capital raise.
The lender proposed a new compensation scheme for borrowers last month, which received approval from the High Court. Amigo’s previous compensation plan, or “scheme of arrangement”, was rejected by the court and the Financial Conduct Authority last year because it limited payouts.
The UK regulator has clamped down on so-called non-standard finance providers in recent years in response to worries about rising consumer debt.
The number of active high-cost, short-term lenders in the UK fell by almost a third between 2016 and the third quarter of 2020, according to FCA figures. During this time Wonga, once the UK’s largest payday loan provider, filed for administration in 2018 after a surge of customer complaints.
