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Amigo Loans warns of £ 35million complaints, cancels dividend and sale talks end

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Amigo shares fell more than 20% after warning it saw a “significant increase in customer complaints.” (Amigo loans / YouTube / Screenshot)

Shares of troubled risk lender Amigo Loans (AMGO.L) fell on Monday after the company warned of an increase in complaints, suppressed its dividend and said a potential buyer of the company had walked away.

Amigo loans said Monday in a statement it had seen a “significant increase in customer complaints in recent weeks”.

The company, which is under investigation by the Financial Conduct Authority (FCA), reached a deal with the regulator to clear the backlog by the end of the month, but said the cost of the operation would be around £ 35million ($ 44million). Amigo warned that provisions to cover complaint settlements could also “increase substantially.”

As a result, Amigo said he would not recommend a final dividend this year.

Read more: Risk lender Amigo under surveillance

Meanwhile, talks to sell the business have also ended.

Amigo solicited offers for the company in January and said it had received several that were “significantly above the level at which Amigo’s shares were trading at the time they were received.” Talks have turned serious with a bidder, but the potential buyer has now moved away, “given the current market environment”. The other offers also evaporated, so Amigo ended its sales process.

Amigo shares fell more than 20%.

Amigo Loans shares sold strongly in Monday's update.  Photo: Yahoo Finance UK

Amigo Loans shares sold strongly in Monday’s update. (Yahoo Finance UK)

Monday’s bad news streak is the latest blow for Amigo, who has been caught up in an uphill battle with its founder and largest shareholder for the management of the company.

James Benamor, who resigned as chief executive in 2016, first publicly expressed his concerns about the way the company was being run. in a long blog post in March. He claimed the company “committed slow-motion suicide” by failing to contain recent changes made by UK regulators.

Benamor pushed for the removal of Amigo’s entire board and management team. Amigo took the unusual step of seeking a High Court injunction against Benamor and his company, The Richmond Group, for try to prevent him from voting to oust the whole board. Amigo claimed the action would violate a “relationship agreement” included in its IPO documents and could anger the regulator. The board is calling on shareholders to vote against Benamor’s proposals at a meeting later this month.

The company said Monday that President Stephen Wilcke resigned over the weekend following the saga.

“I have chosen to resign now to make it clear to everyone that the claims made by the Richmond Group about my motives and those of the board of directors as clinging to our seats for our own purposes are completely untrue. “Wilcke said in a statement.

“THE AGE [extraordinary general meeting] vote is on the relationship agreement and compliance with regulatory obligations, and nothing else. I feel capable of resigning at this point, as the two key issues that keep me on the board are the [sale process] and the dispute over the relationship agreement with the Richmond group are now settled. “

READ MORE: UK government plans tougher rules on foreign acquisitions

Amigo is a subprime lender that provides personal loans to people with bad credit as long as they have a guarantor – a friend or family member who agrees to repay on their behalf if they cannot pay and take late.

Last year the company loaned around £ 700million ($ 854million) to 224,000 customers in the UK. The loans carry an annual percentage interest rate of 49.9%. This is a lower interest rate than traditional payday lenders, but higher than a regular bank loan. It advertises itself as “an alternative to payday loans”.

The FCA opened an investigation last week into Amigo, “That Amigo’s solvency assessment process, as well as its governance and oversight, comply with regulatory requirements. “

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