Amigo censured for inappropriate lending
Amigo Loans has been threatened with a £72.9m fine for failing to conduct adequate affordability checks on its borrowers and guarantors.
According to the Financial Conduct Authority (FCA), between November 2018 and March 2020, the consumer lending platform and loan guarantor “did not have appropriate processes in place to ensure it adequately assessed borrower and guarantor circumstances before approving a loan.” This resulted in a high risk of consumer harm.
The FCA said that it would have imposed a fine of £72.9m on the company, but Amigo was able to demonstrate that paying this fine would cause serious financial hardship to the platform and its users.
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“Amigo failed to assess properly the affordability of its lending, especially to vulnerable consumers, as our rules required,” said Mark Steward, executive director of enforcement and market oversight at the FCA.
“This led to lending that was unaffordable for some and meant guarantors had to step in. It 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.”
Amigo offers guarantor loans to consumers who may be unable to access finance from traditional lenders. However, the FCA found that its credit checks were “inadequate”, relying heavily on the use of a complex IT system with a high degree of automation.
“Design issues and insufficient controls meant that the IT system processed loan applications in circumstances where it was potentially unaffordable for the customer,” the FCA said.
“Although the system raised flags for manual review in some instances, often staff did not sufficiently consider information provided by customers or probe the information they were given before approving a loan.”
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An FCA investigation also found that Amigo did not “adequately consider regulatory requirements around affordability”, and did not act on the findings of several internal and external reviews which identified weaknesses in its assessment process.
As a result of these failings, the regulator concluded that there was an increased risk that the company’s guarantors would have to step in. In fact, a quarter of Amigo’s guarantors were asked to step in and make payments to assist struggling borrowers at some point during the term of the loan.
Furthermore, it was discovered that Amigo did not maintain adequate records of its historic business processes. This included deleting the email accounts of former staff members, which hampered the FCA’s investigation.
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