Subprime lender Amigo puts itself up for sale as complaints rise

Subprime lender Amigo has put itself up for sale and warned of “increased pressure” on the business amid a regulatory crackdown and a rise in the number of customer complaints.

The move comes less than two months after the group’s billionaire founder, James Benamor, used his controlling stake to push his way back on to the board.

Amigo is the largest provider of guarantor loans – where friends and family guarantee repayments on loans to people who may otherwise struggle to borrow – and said it had launched “a strategic review and formal sale process”.

At one stage the company was valued at more than £1bn, but the price has tumbled since the company’s shares started trading on the London Stock Exchange at 275p in June 2018. They plunged again on the latest announcement, down 20% to 53p.

Benamor’s Richmond Group investment vehicle owns a 61% stake in Amigo, and the lender said it had been informed by Richmond that it was a “willing seller” of its holding.

Amigo said no approaches had been made, though John Cronin, an analyst at the stockbroker Goodbody, said: “Our own suspicion is that talks have taken place and there is some confidence that there is at least one buyer(s) for the business. This should smoke more out.”

Amigo offers loans of between £500 and £10,000 at a representative interest rate of 49.9% APR, but has faced challenges on a number of fronts. The Financial Conduct Authority has been taking a growing interest in the sector because it is worried that the proportion of guarantors who are having to step in to cover missed loan repayments has been growing. The regulator recently completed a review of the industry, forcing Amigo to give more information to family and friends about the risks associated with backing loan agreements.

Meanwhile, there has been a sharp increase in the number of customer complaints about Amigo to the Financial Ombudsman Service (FOS). The FOS received 266 new cases during the first six months of 2019, more than double the 117 in the first half of 2018.

A surge in costly complaints was one of the key factors that led to the demise of payday lender Wonga.

In its latest statement, Amigo said it faced a “challenging operating environment”, and that while it remained confident about the robustness of its approach to lending, “we are concerned there may be increased pressure on our business and a continual evolution in the approach of the Financial Ombudsman Service”.

Cronin said his firm had previously highlighted complaints as “the number one risk” in terms of Amigo as an investment.

The City regulator is looking into affordability measures across the whole subprime sector, which could spark further changes at Amigo.

In December, there was a boardroom shake-up at the company, with an announcement that chief executive Hamish Paton and chairman Stephan Wilcke would both be stepping down.