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Robin Henry
Partner - Head of Dispute Resolution Services
Banking & financial disputes
The High Court has agreed with the FCA to reject a scheme of arrangement proposed by subprime lender Amigo, on the grounds that the compensation scheme it proposed to deal with complaints of misselling was not fair.
The High Court has agreed with the FCA to reject a scheme of arrangement proposed by subprime lender Amigo, on the grounds that the compensation scheme it proposed to deal with complaints of misselling was not fair.
This is a summary of the facts:
The court accepted the FCA’s arguments and refused to sanction the scheme. It was not a scheme which a creditor could reasonably accept as fair. The creditors were consumers and were not given sufficient information by Amigo to be able to assess whether what was being presented to them was a fair scheme.
This is an interesting decision as it shows the current pressure on the subprime lending market. Another high cost lender, Provident Financial, is also seeking to restructure because of rising complaints. We should expect to see other similar lenders seeking to restructure because of the pandemic (but at the same time there will no doubt be more customers seeking access to alternative finance for the very same reason).
It also shows that the FCA will intervene to prevent a regulated lender from proposing a scheme which would have the effect of binding customers into a low level of compensation where there is no evidence that the alternative is for the company to imminently collapse. It will be interesting to see what will happen now. Amigo’s shares fell 60% today on the news of the court’s decision – either the court is right and Amigo will present a revised scheme or it is wrong and it will be forced into insolvency, in which case the customers will receive nothing.
26 May 2021
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Partner - Head of Dispute Resolution Services
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Partner - Head of Dispute Resolution Services
Specialising in Banking & financial disputes, Commercial disputes and Corporate recovery, restructuring & insolvency
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