(Reuters) -Britain’s financial regulator publicly censured subprime lender Amigo for failures to undertake affordability checks and said it would have imposed a 72.9 million pound ($88.6 million) fine if the company was not in financial difficulty.
The Financial Conduct Authority (FCA) said a fine would have threatened Amigo’s ability to complete a High Court-sanctioned rescue plan for the company to enable it to pay compensation to customers mis-sold loans.
Amigo’s shares, which have collapsed in value due to a deluge of customer complaints since its 2018 stock market debut, jumped as much as 56% on Tuesday. The stock was last up 32% at 3.47 pence.
The watchdog found Amigo’s past failures led to a high risk of consumer harm and that one in four of the lender’s guarantors was asked to step in and make payments to assist struggling borrowers at some point during the term of the loan.
A guarantor is typically a family member or a friend who agrees to step in and make a loan payment when a borrower is unable to pay what is due.
“(Amigo) also had the effect of prioritising the firm’s commercial interests over the obligation to comply with the rules and safeguard customers from unaffordable loans,” Mark Steward, FCA’s executive director of enforcement and market oversight, said.
Amigo was allowed to resume lending on a pilot basis in October after stopping in November 2020.
The company’s rescue plan is conditional on raising fresh capital, but the firm has said in previous statements it has struggled so far to secure backers and may have to be wound up if sufficient cash is not raised by May 26.
Amigo’s share price has fallen 99% from a high of 315 pence shortly after a 2018 IPO valuing it at 1.3 billion pounds. The company was worth 12.4 million pounds before market open on Tuesday, according to Refinitiv data.
“I would like to apologise again to any customers impacted for the past failings in lending practises that occurred during the period 2018-2020,” Amigo Chief Executive Officer Danny Malone said in a separate statement, adding the firm accepeted the findings and had put in place better lending controls.
($1 = 0.8224 pounds)
(Reporting by Yadarisa Shabong and Iain Withers; Editing by Subhranshu Sahu and Mark Potter)
