B - The Schemes of Arrangement
What is the New Business Scheme?
The New Business Scheme includes both a ‘Preferred Solution’ and a ‘Fallback Solution’. The reason is that there are two specific events that must happen in the Preferred Solution for business (i.e. future lending) to continue. These specific events are called the Conditions (set out below).
The success of the ‘Preferred Solution’ under the New Business Scheme depends on Amigo returning to lending under an improved business model with new products for customers offering increased flexibility and affordability.
It has been named the ‘Preferred Solution’ as it was the preferred route forward negotiated by the Independent Customers’ Committee. Amigo believes this will provide the most cash compensation for customers with valid claims and the FOS. However, for the Preferred Solution to go ahead, the Conditions that Amigo must meet are:
1. Amigo must start lending within 9 months of the date the New Business Scheme is approved. (This requires the Financial Conduct Authority to be satisfied that Amigo can recommence lending); and
2. Within 12 months of the date the New Business Scheme is approved, Amigo must issue at least 19 ordinary shares for every 1 ordinary share in issue immediately beforehand. (A successful share issue will be used to fund a payment of at least £15m to creditors under the Preferred Solution).
If the Conditions are met and the New Business Scheme goes ahead, Amigo estimates that under the Preferred Solution it will have approximately £116 million in cash to pay creditors with a valid claim. If Amigo collects more money from its existing loan book than is estimated, or if it can contribute more than £15 million from issuing shares, Amigo will pay more than £116 million. However, under the Preferred Solution, Amigo will not pay less than £112 million in compensation. Amigo believes this will provide the most cash compensation for creditors with valid claims and the FOS.
If Amigo doesn’t achieve both Conditions, we will follow a plan to wind-down the business. This plan is called the ‘Fallback Solution’. Under the Fallback Solution, Amigo’s business will be wound down, meaning outstanding loans will be collected over time. We will pay off our bonds and operating costs, and then the money that is left over will be used to pay creditors with valid claims and the FOS. Once we have done these things, Amigo will go into liquidation (i.e. cease to exist). There is no set cash amount for redress creditors in the Fallback Solution.
What is the Wind-down Scheme?
The Wind-Down Scheme is based around Amigo winding down the business and not returning to lending. If this Scheme goes ahead, Amigo will gradually close down the business, collecting remaining loans, and then pay off all our necessary costs, such as our bonds and operating costs. The remaining money will be paid to our creditors who have a valid claim in the Scheme. Once we have done these things, Amigo will go into liquidation (i.e. cease to exist). Based on our estimates, the amount of available money available to pay cash compensation in the Wind-Down Scheme will be less than is estimated to be available in the New Business Scheme, but would be more than in administration.
What is the difference between the Wind-Down Scheme and administration?
While there are some similarities between the Wind-Down Scheme and an administration, the key difference is that our existing management would continue to retain control of the management of the business in a wind-down. In an administration, we would appoint an external administrator to take control of and wind-down the business. This would be someone with expertise in the financial services sector and who is also a licensed insolvency practitioner.
We are hopeful that both creditors and the Court approve the Preferred Solution under the New Business Scheme, as it is what the Independent Customers’ Committee and our Board each think is the best option for creditors. However, if this is not possible, we believe that a Wind Down Scheme would also result in greater returns to creditors than an administration.
C - Claims
How do I know if I have a claim?
You may have a valid claim if you believe you were given an Amigo loan or stood as a guarantor for an Amigo loan when you couldn’t afford to make the repayments, at the time it was given. This applies to borrowers and guarantors. You may also have a valid claim if you are or were a borrower or guarantor on an Amigo loan and you have any other claim arising out of or in relation to an Amigo loan.
I want to make a claim
While it is possible for you to make a claim (or a complaint) to Amigo now, you should be aware that we will not be able to progress that claim until it is clear whether a Scheme has been approved. If a Scheme is approved, then your claim will be assessed under the terms of the Scheme.
If you do choose to go ahead and make a claim to Amigo now, once Amigo acknowledges your claim and confirms that it will be included in the Scheme you won’t need to resubmit the details of your claim as part of the formal claims submissions process in the Scheme.
Please see a timeline of the Scheme events by clicking here. This timeline shows when we expect you to be able to make a claim in the Scheme.
What is the process for assessing claims? And who decides if it is valid?
After customers have had the opportunity to submit a claim, all claims will be assessed against the detailed claims methodology.
A claim will be assessed as valid (or not valid) by reviewing it against the detailed claims methodology. This methodology was created in conjunction with an independent skilled person (who has been appointed by us and the FCA) to ensure that it meets the necessary regulatory and legal requirements.
SchemeCo will let you know whether it agrees or disagrees with all or part of your claim through a specially designed website or by email.
If a customer disagrees with the assessment of their claim, they will be entitled to refer the claim to an independent person, called the “Scheme Adjudicator”. The Scheme Adjudicator is an independent person who is appointed to assess claims where there is a disagreement between a customer and SchemeCo about whether the claim is valid or the value of the claim. The Scheme Adjudicator will assess the claim (or a group of similar claims) by reference to the same claims assessment methodology.
What evidence will I need to prove the loans were not affordable?
You should provide as much information as you can in support of your claim to show why you think your loan was not affordable. SchemeCo may ask you to provide further information or evidence that will help it reach a decision in respect of your claim.
An example of evidence that may be required (to show that your loan was unaffordable) are documents that show your income and expenditure when the loan under review was paid out.
What are the criteria for deciding whether a claim is valid?
We have a detailed methodology to ensure that claims are properly assessed. The methodology has been reviewed by an independent skilled person (who has been appointed by us and the FCA) to ensure that it meets the necessary regulatory and legal requirements.
When will I find out if I am owed any compensation?
We will notify you that we have received your claim within 8 weeks of the claim being submitted to the Website. We will also notify you through the Website of the outcome of our assessment of the claim. If we have received all the information that we require and you do not disagree with our assessment of your claim, our assessment of the claim will become final 30 days after we have notified you of our assessment. However, if you disagree with our assessment of your claim, you can choose to send your claim for adjudication. In most cases, Amigo estimates that the adjudication process will take approximately three months.
When will I get any compensation paid to me?
It is estimated that for the New Business Scheme and Wind-down scheme it may be possible for initial payments to be made in September 2023 with final payments being made at a later point. In an administration it is estimated that initial payments might be made early 2024.
Can I still make a claim if I have exercised a right of equitable set off?
To be able to exercise a right of equitable set-off you must have already made a complaint. This complaint will be automatically included as a claim within a Scheme, if a Scheme is approved.
The actual claim which is being used to assert equitable set-off will still need to be assessed in the Scheme to decide if it is valid.
Will I receive compensation for each and every loan I have taken out (including top-up loans)?
You will be able to submit a claim for compensation for each individual loan, if you believe the claim is valid. Each lending decision (loan you were given) will be assessed individually under the claims assessment methodology.
What happens if I have already made a complaint to you?
If you have already made a complaint and before 21 December 2020:
i) you had your complaint upheld by Amigo or you had accepted a settlement offer from Amigo;
ii) you had received a settlement offer from Amigo dated on or after 21 June 2020, which you did not accept or reject;
iii) you have been told that Amigo had accepted an opinion issued by an adjudicator or investigator at the Financial Ombudsman Service (FOS) in respect of your complaint (FOS "opinions" may also be referred to as "views", "initial assessments" or "provisional assessments” and may be in writing or not); or
iv) you had obtained a final decision in your favour from the FOS and Amigo had not notified you that it intends to ask a court to review that decision:
you will not be affected by either of the Schemes and will be paid the amount specified in the settlement offer, FOS adjudicator's opinion or FOS final decision in full. Unless you also have a different claim, you do not need to take any action under the Schemes. Most of these customers have already been paid, but if you have not please contact us so we can speed up that payment.
If however you have made a complaint but do not fit into any of the instances described above, your complaint will be dealt with under the Scheme if it is approved.
How will the Schemes affect me if my loan was sold to Intrum?
If your loan was sold to Intrum and you make a claim in the Scheme which is found to be valid, Amigo will repurchase your loan from Intrum. Your loan will then be treated in the same as any other Amigo loan under the Scheme.
How do we calculate the estimated pence in the pound (p/£) returns for redress claims, for example the 41p/£ in the Preferred Solution?
The amount of redress that would be paid to creditors can only be estimated, as we won’t know how many customers will make a claim, or how many of those claims will be valid until these claims are actually made and assessed in the Scheme. However, we have estimated the amounts based on what we do know, together with assumptions based on our experience to date, response rates seen in other similar schemes and guidance from our advisors.
The estimated p/£ returns in our Schemes are calculated by taking:
A. The total cash available in the Scheme; divided by,
B. The estimated total cash value of valid claims (see below for how this is calculated)
The estimated total cash value of valid claims (B) is calculated by multiplying the following:
o the total number of claims we estimate will be received
o the proportion of those claims which we estimate will be valid
o the estimated average cash redress amount per customer
More detail of the expected numbers is below but, in summary, in the New Business Scheme, if the total cash available is £116m (A) and the cash value of valid claims is estimated at £285.8m (B).
Therefore, A ÷ B = approximately 41 pence per pound of claim.
For those that would like a little more detail on these numbers please see our Supplementary information section below.
Why has the estimated p/£ returns for redress claims changed?
The fund to pay creditors is now expected to be £116m, rather than the original £112m as stated in the PSL in November. The reason for this is due to the Scheme timeline being moved back, and so a further month of loan collections will be taken into consideration when estimating the amount of the Scheme fund. However, the estimate for the total amount of cash redress that will be payable has also increased. This is mainly because of “compensatory interest” which we apply to cash redress at a rate of 8% up to the date the Scheme is approved. Because this date is now later than originally expected, more compensatory interest will be due.
If a claim is partially upheld will interest still accrue?
If you’ve had a claim partially upheld, which means you had multiple loans and we’ve only upheld claims on some, but not all of them, we will remove all interest for the loans with upheld claims where applicable.
If a claim on a live loan is not upheld, and the loan has not hit its interest cap, the interest will continue to accrue as normal.
How do I know if I’ve logged an official complaint?
If you’ve made a complaint to Amigo, you would have received an acknowledgement letter within 5 days of the complaint being raised, and then holding letters when 28 days and 56 days has passed. You may also have email copies of these too. This is confirmation of your complaint.
If you have already submitted a complaint to us or the FOS which has not been finally resolved and either of the Schemes becomes effective, we will inform you if you have an outstanding claim and tell you that you do not need to resubmit your claim in the Scheme, although you may need to provide further information or evidence if requested.
Will loans with upheld claims be removed permanently from my credit file?
Any loans with a valid complaint will be removed from a customer’s credit file permanently. Please keep in mind, this won’t happen immediately, and some Credit Reference Agencies may take up to 6 months to take the loan off of your credit file.
If there is an outstanding balance after any redress is applied, usually as the initially lent amount (called the principal) hasn’t been repaid, the loan will only be removed once this is settled.
D - General
What is a Scheme of Arrangement and why is Amigo proposing a Scheme?
Over the last two years Amigo has received lots of complaints from customers, mostly those who’ve had loans they might not have been able to afford because we didn’t carry out the right checks when the loan was given to them.
Because we cannot afford to pay all the compensation or ‘redress’ due, we are using a legal process called a Scheme of Arrangement, or Scheme for short. A Scheme is a compromise or an ‘arrangement’ between a company and its creditors. In our case, the creditors involved are our customers that are owed redress and the Financial Ombudsman Service.
A Scheme will allow these creditors to receive a fair and proportionate share of the total compensation available.
What is Amigo proposing?
Amigo is proposing two Schemes of Arrangement:
- The New Business Scheme; and
- The Wind-Down Scheme
Please carefully read the ‘Explanatory Statement’ to understand the different outcomes of the Schemes and how this affects you before voting.
You can also find additional information about the proposals in Section B - ‘The Schemes of Arrangement'.
Wasn’t I contacted about this before?
Yes, Amigo did previously propose a Scheme. However, in May 2021, the High Court did not approve the Previous Scheme (meaning it could not go ahead) as the Judge was not satisfied that the Previous Scheme was fair. He suggested we try again. We are therefore proposing two new Schemes for creditors to vote on.
We encourage you to thoroughly read the information provided and have your say by voting on the Schemes here.
How does a scheme affect my current loan?
The Schemes do not affect the normal process of repaying any current Amigo loans. After claims have been assessed in the Scheme, customers with an existing loan who have a valid claim will be given a balance adjustment where their outstanding balance will be reduced by the amount of their valid claim. If the amount of compensation owed to them under the Scheme is greater than the amount of any loan balance they owe Amigo, they will receive payment of a proportion of any additional amounts due to them under the terms of the Scheme.
Customers who do not have a valid claim will not be able to benefit from a reduction in their outstanding balance and will still need to repay their current loans.
This is also the situation that would apply if Amigo goes into an insolvency process such as administration.
What has Amigo done differently?
Amigo is committed to providing creditors (including customers with a valid claim) with the best possible outcome. We want to make sure our Scheme proposals are better than before; and have improved customer involvement and understanding. The details of the Schemes have been guided by, and negotiated with a group of Amigo customers called the Independent Customers’ Committee.
This is made up of eight randomly selected volunteers from past and present borrowers and guarantors, together with an independent Chair with considerable experience in financial services. The Committee has been offered the opportunity to get independent advice paid for by Amigo and has negotiated the Schemes’ new terms. By doing so, we believe that our customers’ voices have been heard and represented in the design of the Schemes.
If you restart lending, will your lending criteria change?
Yes. As a new Board and management team, we are focused on developing a business that is very different from the Amigo of the past, founded on lending responsibly with enhanced affordability assessments (including use of Open Banking technology).
We continue to engage closely with the FCA to address any concerns they may have about Amigo returning to lending again. However, if the FCA gives us approval to begin lending again, the new Amigo will provide transparent, innovative and flexible products that are designed with customers’ interests at heart. We know we have more work to do to demonstrate to the FCA that we are able to start lending again. Additionally, any new lending will happen gradually to show we have an improved business model that the FCA can be satisfied with.
If Amigo goes into administration, will existing loans be written off?
If Amigo goes into administration, an external administrator will take control of the business. In this situation, loans will not be written off and efforts to collect repayments from customers will continue in the normal way, unless customers have a valid claim that reduces their outstanding loan balance in full.
Why is Amigo continuing to collect existing loans when some customers will be owed money?
Continued loan collections from customers who do not end up with valid claims in the Scheme is an important part of Amigo doing the very best that it can to provide a fund to compensate those customers with valid claims. A portion of the ongoing collections from those customers who have already submitted a complaint are now being held in a separate trust account from 30 November 2021. This is being done to ensure that, any of these customers that have a valid claim and are due cash compensation from the Scheme, will be refunded in full to the extent of the cash compensation due from the trust account.
Why does the Scheme process take so long?
We appreciate the Scheme process has taken some time and we appreciate this may be frustrating. We want our customers to know that we are not intentionally causing this process to be long. There have been several factors that have had to happen to get us into a position, where we can put forward two New Schemes that we believe to provide the best outcome for our customers. These factors include, negotiating with the Customer Committee, liaising with our regulator, the FCA, as well ensuring we meet the given time frames before any Scheme can be considered and approved.
All of these steps were necessary to help provide what we believe is the best potential outcome for our customers who are owed redress, and the FOS.
If we vote for the Schemes how do we know that these issues will not happen again?
Amigo’s brand new management team, and the company as a whole, are committed to righting the wrongs of its past.
We have worked continuously with our regulator, the Financial Conduct Authority, as well as the Independent Customer Committee, made up of eight randomly selected volunteers from past and present borrowers and guarantors, together with an independent Chair with considerable experience in financial services.
This is to ensure that all aspects of our Schemes and future return to lending, are in the best interests for our creditors, customers, and the needs of the people in the UK who can’t borrow from mainstream banks.
My complaint was put on hold, what does this mean?
Due to the ongoing Scheme, all complaints have been paused. This means we are not processing complaints in the way we would normally due to the required legal process.
If you have already made a complaint or claim when a Scheme becomes effective, then we will include that in the Scheme without you needing to submit it again although you may need to provide further information or evidence if requested.
If Amigo returns to lending, what time frame will reimbursement begin?
If our New Business Scheme (which means Amigo will return to lending with a new and revised product), customers are likely to receive their first payments in September 2023, which is estimated to be sooner than if Amigo went into administration.
E - Supplementary information
We included some assumptions around our complaints provision when we published our financial results for the first 9 months of our financial year. Our analysis can be found here.
Estimated future claims to be received 76,984
Estimated proportion of those claims that will be upheld 65%
Estimated average redress payment due: £4,451 (plus any compensatory interest due on that amount)
We have estimated that from our complaints provision of £347.5m there will be balance adjustments and other items which will be paid in full and will therefore not be due a cash redress payment in the scheme. Therefore, the value of valid claims where cash is due in the scheme is currently estimated to be £285.8m, including amounts due to the Financial Ombudsman Service.
In addition, in the financial results for the first half of our financial year there is a section called our ‘Consolidated Financial Statements’. In Note 2 of our Consolidated Financial Statements, we provide a further sensitivity analysis around the effect on the key assumptions referred to above (for example: volumes, uphold rate, and average redress).
Still have a question? Whilst we cannot reply to individual questions, we welcome you to submit a question to us here.