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Amigo Loans Facing a Challenging 2020

To say 2019 was a difficult year for Amigo Loans would be an understatement. It was a year of turmoil for the Bournemouth-based sub-prime lender, the UK’s largest. Since the collapse of Wonga, Amigo has grown to become the country’s biggest guarantor lender by some considerable margin. In fact, Amigo recorded an estimated 88% stranglehold over sub-prime market following the demise of its rivals.

Having floated in 2018 with a listing in the London stock exchange, the company enjoyed a market capitalization of £1.3bn, leaving the founder – James Benamor,  “sitting on a paper and cash fortune worth about £1.1bn” – almost triple the previous estimated wealth of £380m. However, 2019 saw some big changes.

After James Benamor left the Amigo Holdings board in September 2018, reportedly to set up a rival loans company, problems started to mount. Pre-tax profit for the first six months of 2019 fell to £42m, down £6m on the same period a year earlier. The proportion of overdue loans on its books rose steadily and regulators have eyed not just an industry-wide crackdown, but also kept a close eye on Amigo Loans. Of the near 300 complaints made about Amigo Loans to the Financial Services Ombudsmen, a staggering 59% were upheld, finding against Amigo Loans. The scale of the guarantor loan refunds meant that Amigo was forced to set aside almost £ 11 million to cover payouts.

On paper, 2019 wasn’t a complete disaster for Amigo Loans. By Q4 it had gained nearly 34,000 new customers, a rise of 18%, to take its customer base to 222,800. The loan book itself stood at £730.7m which saw an impressive 8.8 % increase from the same time last year. In fact, James Benamor, as a result of the profits at his holding company edging up to £70.8m in the year to the end of last March, from £66.9m the year before, paid himself a whopping £2.9m dividend.  Yet, for the former self-confessed petty criminal and father of eight, 2020 promises to be an important year.

Having wrestled his way back onto the board at the end of last year, Benamor’s return to the company he founded from his kitchen, prompted three board members, including the CEO and chairman to quit. But it isn’t from internal comings and goings that place the largest threat on Amigo Loans’ future.  The company is well within the sights of the regulators and politicians. Both Wes Streeting, Labour MP for Ilford North and Stella Creasy, Labour MP for Walthamstow have been very vocal in their criticisms of Amigo Loans. Stella Creasy even went as far to say: “If your friends are giving you Amigo loans, you don’t need enemies.”

So, with regulatory and political pressure, coupled with rising debt and a growing number of upheld complaints, the pressure is most certainly on James Benamor and Amigo Loans. Whether they can survive 2020 and any regulatory crackdown remains to be seen, but it is most certainly a space worth watching.

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