Amigo Loans Disregards FCA’s Claims into Guarantor Loans

Posted byJosie Melvin | Category Blog | Date 07 June 2019

Chairman of Amigo Loans Stephan Wilcke has recently made a statement claiming that the lending company will be fighting back on the supposed false claims made about their business model. Guarantor Loan Comparison investigates:

Amigo Loans lends to those who struggle to get loans from the more mainstream banks. This can be down to a number of different reasons, one of the main ones being bad credit, requiring a guarantor for each and every loan their customers take out. The loan guarantor is typically a friend or family member, who is required to pay the mandatory loan payments if the borrower fails to keep up with payments.

Amigo, now having joined the stock exchange, has recently reported its first annual results, with an increased revenue of 28% (£271 million), and an increase in profits before tax of a staggering 68% (£111 million).

This response from the lenders has been down to the numerous different concerns raised in the past few months by the UK’s financial watchdog the Financial Conduct Authority (FCA).  The FCA’s Executive Director of Supervision Jonathan Davidson has commented on the regulatory body’s recent findings into guarantor loans, claiming that “over the last few years we have seen a dramatic increase in the use of guarantor loans by consumers.”

The FCA has released “anecdotal evidence” in its recent investigations into the UK’s guarantor loan sector, showing that many guarantors do not entirely understand their responsibilities in this role. In addition to this claim, the country’s financial watchdog has also stated that a concerning amount of the guarantors do inevitably end up paying for at least some of the loan, and interest rates for such loans are unjustly high.

The FCA are striving to improve this sector of lending, focusing on “affordability and on understanding whether potential guarantors have enough information to understand the likelihood and implications of the guarantee being enforced.”

Due to the FCA’s public statements about guarantor lending earlier on in the year, Amigo Loans hit a record low in shares. However, these have since risen 5.6%, Wilcke reflecting on this – “I am pleased to report that the business has been able to deliver on our principal IPO commitments this year and propose a larger than expected full-year dividend of 9.32p due to our increase balance sheet flexibility.”

Wilcke’s response to the FCA’s findings and the claims made about guarantor lending companies was as follows: “Arguably, Amigo being a public listed company has raised the profile of the guarantor loan product and fuelled some urban myths about us and our customers. In future we will work harder to dispel those myths.”

Amigo Loans chairman added to this, understanding that “It’s such a good product and has grown a lot faster than the wider market for mid-cost credit, so it’s natural for the regulator to look at it”