Borrowers from embattled subprime mortgage bank Amigo Loans hit back after it sent them a survey asking why they voted against the bailout.
Britain’s largest provider of collateralized loans last month had its proposed scheme for a cost-cutting arrangement rejected by the High Court.
The judge ruled that it was unfair and that the former and current borrowers, who could have been compensated with only 5 per cent of what they were owed for their badly sold loans, had not been properly informed of the proposals or any alternatives to them.
There are fears Amigo Loans may be on edge after the Supreme Court rejected the proposed bailout. She said such a rejection could push her into bankruptcy
It has taken the company back to the drawing board, after the Financial Conduct Authority said it believed a “fairer plan” was possible, although the company said failure of the scheme would likely send it into administration.
The fewer than 4,000 borrowers who voted against the scheme were sent emails Wednesday morning from Amigo CEO Gary Jenison, asking them several questions, including why they voted against the scheme.
Similar emails requesting feedback were sent to the 74,866 creditors who voted in favor, as well as those who did not vote at all.
Among the options given to “No” voters were “I didn’t think it would give clients the best outcome for any compensation claims,” ”I didn’t get it,” and “I wanted Amigo to go into administration.”
Among the other questions was: How do you feel about the court’s objection and the consequences of that? (such as a further delay in receiving any compensation for customers who have a valid claim)”
Under the proposed bailout, Amigo is set to set aside £35m to repay borrowers who have missold unsustainable loans.
There were concerns that borrowers might receive less than 5 percent of what they were owed.
The Financial Ombudsman received about 12,000 complaints from Amigo customers, but resolved only a fraction of about 1,000 complaints. Nine out of 10 complaints resolved were upheld by the Financial Ombudsman.
However, Amigo claims the support rate for all complaints to FOS is lower at about four in 10.
A tweet opened on March 31 announcing the vote on the system included the tagline: “Vote for your money”.
The judge in the Supreme Court case said that “the creditors lack the necessary information or experience to enable them to reasonably weigh the alternative options available to them.”
To those who voted ‘no’, the email added: “We have previously said that without the scheme we would likely go into bankruptcy.
This means that no monetary compensation will be available to customers who missold Amigo Loan. This situation is still a very real possibility.
Amigo was criticized by the regulators and then the Supreme Court for failing to correctly identify the bailout for the borrowers
In his judgment, Mr. Justice Miles effectively accused the lender of creating fear over this proposal, saying, ‘It is unlikely that the directors would put the group directly into management and destroy the substantial surplus value of the enterprise.
“There is nothing in the evidence to suggest any imminent cash flow event that would force Amigo into bankruptcy.”
The subprime lender’s share price has collapsed 72 per cent in the past month, since the Financial Conduct Authority (FCA) weighed in on May 10 to announce it would oppose the plan in court.
It crashed from 18.6p on May 24th to just 8.3p the day the chart was rejected two weeks ago.
“Shocking that Amigo appears to be targeting people who voted no to the scheme,” one borrower, who voted for the scheme, wrote on Debt Camel’s blog, where the email details appeared.
Another said: “I feel they singled out everyone who voted against the scheme.”
A third added, “The questions are farcical and I’m still looking forward to shifting the blame, I was scathing in my answer.”
Sarah Williams, the debt advisor who runs Debt Camel, said: “FCA said Amigo had not accurately described its position and the proposed scheme to clients.
“It is very frustrating that Amigo is now talking back to customers without explaining things properly.
I’m not sure the point of asking customers what they think of a situation when those customers weren’t properly informed of it in the first place.
Britain’s city regulator says Amigo’s proposed bailout is unfair to borrowers who would have greatly reduced their compensation.
These emails asking customers who voted for their ideas again confirmed there would be no cash payments in insolvency, but Amigo failed to mention that 130,000 existing loan borrowers would be able to reduce or clear their balances in the event of insolvency A capacity claim is supported costs, so they will gain little or nothing from the scheme.
Amigo told the London Stock Exchange this morning that it continues to look at all options and was in talks with the FCA to “determine an appropriate way forward”, including a more generous scheme for borrowers.
John Cronin, a financial analyst at stockbroker Goodbody, said the uncertainty about Amigo’s future “may persist for some time yet.”
An Amigo spokesperson told This is Money: ‘We’ve been reaching out to customers who voted for and against the scheme to let them know what’s going on and at the same time gather their views and advise us to think as we determine our next steps.
We have always had an ongoing dialogue with our customers and this is not the first time we have sought their opinions.
“We want to hear from all of our customers and will also reach out to a sample of those who did not vote in the coming days, to gain a greater understanding of their reasoning.”
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