Amigo Loans “committing slow-motion suicide”, says founder Benamor

Benamor and the listed lender’s board have been at loggerheads ever since his return to an active interest in the firm, over its approach to lending, regulatory requirements and an ongoing sale process.

In a blog, which Benamor posted on medium.com and shared on Twitter, Amigo’s founder made a host of criticisms of the board, all of which it has refuted or claims are inaccurate.

In one grievance, Benamor said he voted against the company’s decision to enter a formal sales process, although Amigo’s board has disputed this in its response. However this is just one aspect in a string of allegations.

Benamor, who owns 60.66 percent of the lender through his investment vehicle Richmond Group, said he reinstated himself onto the company’s board in December 2019 “because I could not understand how Amigo seemed to have such high redress rates, but was still paying out on target”.

He added: “My first action as a director was to personally audit the most recently lent and refunded loans. I found that Amigo had, for six months, been lending almost entirely in a way that matched their own complaints team’s definition of ‘irresponsible’. I thought that proving this would force the board to take adequate action. It did not.”

His blog adds: "During my short time back on the Amigo board, I have witnessed a company committing slow motion suicide, whilst playing out the script of Brewster’s Millions. Within one year of my stepping down from the board, the most efficient company in the FTSE 250 had become a cash cow for consultants, lawyers and suits, all of whom had an interest in keeping the gravy train running for as long as possible."

FOS and responsible lending

A major criticism levelled by Benamor focuses on what he claims was Amigo’s approach to the Financial Ombudsman Service (FOS). He said that throughout the 2010s, FOS adjudicated a "tiny trickle" of complaints against the lender, "almost always" finding in its favour.

But in 2019, he said, the financial ombudsman’s stance changed.

In the spring of that year, he claims, the FOS had a meeting with senior Amigo executives and informed them that they had changed their stance on irresponsible lending, and that Amigo should too.

As a result, his blog adds, "loans to customers with no credit problems, but who had an overdraft or a credit card which had not been cleared in full at the end of each month, became ‘irresponsible’ loans - as did loans to virtually everyone else".

Later, Benamor’s bog claims, "the FOS issued figures showing that, true to their word, they did actually uphold 90 percent of all complaints relating to guarantor-backed loans in 2019."

This, he said, presented the company’s board with a choice: Either take FOS to a judicial review to challenge their new stance on irresponsible lending, or agree the loans had been made irresponsibly, make a provision for well over £1bn of redress, cease lending and put themselves into administration.

The board, for its part, rejects Benamor’s "binary" assessment.

Benamor also characterised the sales process of Amigo Loans as “nothing more than yet another handy excuse to delay necessary action” on this problem.

The board’s statement

On March 5, the board of Amigo issued the statement refuting all of Benamor’s claims, including his assertion over the binary choice of administration, or taking FOS to a judicial review. Here is their statement in full:

"Mr Benamor’s statement contains several material inaccuracies and is fundamentally incorrect in a number of respects. Amigo does not accept Mr Benamor’s account of events. Amigo remains fully committed to fulfilling all of its legal and regulatory obligations, and will continue to engage with regulators in an appropriate and constructive manner. Amigo confirms that the contents of the announcement of its Q3 results on 27 February 2020 remains accurate at this point in time, including in relation to the levels of provisioning."

"In particular:

• "Mr Benamor inaccurately states that he voted against the formal sale process. The Amigo Board, including Mr Benamor, unanimously approved the announcement of the strategic review and formal sale process on 27 January 2020. The formal sale process was initiated as a direct consequence of Mr Benamor notifying Amigo that Richmond Group (Mr Benamor’s holding vehicle) was a willing seller of its shares in Amigo, which would place Amigo into an offer period in accordance with the takeover code.
  
  
• "Mr Benamor inaccurately states that the Financial Conduct Authority (the “FCA”) authorised Amigo in 2017. Amigo was authorised by the FCA in 2016.
  
  
• "Amigo rejects Mr Benamor’s binary analysis that Amigo either must take FOS to a judicial review or that it has a systemic problem with its loan book. The company monitors its loan book regularly and has concluded, as part of its Q3 review process, that it does not have a systemic problem. In the company’s Q3 results, it announced a £18.7m provision. This provision relates to both the estimated costs of customer complaints received up to 31 December 2019 and the projected costs of potential future complaints on certain higher risk historic loans. The Q3 results were unanimously approved by the Amigo board, including Mr Benamor.
  
  
• "While it is clear that the FOS’ approach evolved during 2019, it is not the case that the FOS informed Amigo of a specific change in its approach during spring 2019 as Mr Benamor suggests. The FOS continues to determine complaints on a case-by-case basis and Amigo responds accordingly."

In February, the board also rowed back on a board appointment backed by Benamor.