Amigo Loans on borrowed time in court wait

Amigo Loans is heading for a crunch court decision that could tip the lender into administration, leaving 700,000 borrowers without compensation. 

The firm, founded by self-confessed former petty criminal James Benamor, has asked the High Court to approve a scheme that would limit compensation payouts to customers who were mis-sold loans. 

If the High Court approves on March 30, Amigo’s creditors can vote on the scheme – with 50 per cent needing to vote in favour. 

Decision time: The firm has asked the High Court to approve a scheme that would limit compensation payouts to customers who were mis-sold loans

But if the High Court rules against the scheme, sources said the cost of paying compensation in full would tip Amigo into insolvency. 

This would leave 700,000 former customers facing the prospect of no compensation at all. 

Amigo Loans, founded in 2005, provides loans to people with a patchy credit history. But it has come under pressure after a clampdown by the Financial Conduct Authority which has opened the floodgates to mis-selling claims. 

Gary Jennison, chief executive of Amigo, said: ‘We are a new team dealing with past mistakes and it is crucial that Amigo’s customers have an opportunity to vote for their money through supporting the scheme. The very real alternative is an insolvency, where our 700,000 past customers will get no compensation and our 300,000 current customers will be at the very back of the queue [for mis-selling compensation] after our lenders.’ 

Its rival Provident Financial warned last week that a deluge of mis-selling claims could sink its doorstep lending division.