The Financial Conduct Authority (FCA) was set to impose a fine of over £72 million on Amigo Loans had the company not demonstrated that this would cause it ‘serious financial hardship’.

Between November 2018 and March 2020, the loans company did not have adequate processes in place to assess borrower and guarantor circumstances before approving a loan.

Instead of a lump-sum penalty, Amigo has been issued with a court-sanctioned scheme to pay redress to customers, which has that has been approved creditors and the High Court.

Amigo’s lending-decision imbroglio was caused by its heavy reliance on the use of a complex IT system with a ‘high degree of automation’, the FCA said. Design issues and insufficient controls, however, meant that the IT system processed loan applications in circumstances where it was potentially unaffordable for the customer.

“Amigo failed to assess properly the affordability of its lending, especially to vulnerable consumers, as our rules required,” explained Mark Steward, executive director of enforcement and market oversight at the FCA.

While the oversight resulted in lending that was “unaffordable for some”, Steward added that it “also had the effect of prioritising the firm’s commercial interests over the obligation to comply with the rules”.

Commenting on the redress scheme, Steward concluded: “The scheme aims to ensure an amount of redress is paid to affected customers that is better for customers, in these parlous circumstances, than any other likely outcome.”

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