The founder and majority shareholder of Amigo Holdings (AMGO) has accused the guarantor lender of “committing slow motion suicide” through its handling of customer complaints and underwriting, leading shares to hit a fresh low this week.
James Benamor, who this week resigned from the group’s board after a brief return, accused Amigo directors of failing to defend their lending practices following a surge in affordability complaints upheld by the Financial Ombudsman Service. In a post on the blogsite Medium, Mr Benamor argued that by refunding all complaints received and continuing to lend on a “virtually unaltered basis”, Amigo obviated a crucial decision.
“If they agreed that almost all loans in their book had been made irresponsibly, they should have informed shareholders that they had now taken this position, made a provision for well over £1bn of redress, ceased lending and put themselves into administration,” Mr Benamor wrote.
Amigo rejected the characterisation, describing the article as a “binary analysis that Amigo either must take the Financial Ombudsman Service to a judicial review or that it has a systemic problem with its loan book”. The lender also points out that Mr Benamor approved the formal sale process and the company’s third quarter results, in which an £18.7m provision was booked to reflect higher customer complaints.
The spat comes amid a crisis for Amigo, whose subsidiary Amigo Loans is the UK market leader in guarantor-backed credit. As well as rising complaints and an uncertain regulatory environment, questions over the sustainability of repeat lending forced Amigo to cut its loan growth forecasts. At 26.6p, the shares are more than 90 per cent down on their June 2018 listing price.
Analysts at Numis, who have long described the guarantor model as a “superior product” in high-cost credit, cut their target price and recommendation to ‘under review’. The brokerage currently expects dividends of 10.6p per share for the year to March 2020, which would imply a yield of 40 per cent.
