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UK regulator hints at a possible return to lending for Amigo Loans

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The Financial Conduct Authority has laid the groundwork for Amigo Loans potentially being able to resume lending, saying it will not oppose the group’s new financial plan when it goes to court this week.

The regulator’s decision not to intervene at this stage is an important step for the troubled payday loan company after it rejected an earlier proposal, though it’s just one of many obstacles to a full recovery.

Amigo, which lends to people with bad credit histories, will present a settlement plan in the High Court on Tuesday, making a bigger offer to creditors and detailing the terms of a new business model and a return to lending.

FCA said it would not oppose the plan but did not rule out intervening in the new arrangement in the future.

It added that the company could return to lending if the program were approved by the court and the loan conditions were met. “Should the firm start lending again, the FCA will continue to monitor them closely,” it said.

Amigo halted lending in November 2020 citing uncertainty surrounding the pandemic and was unable to resume business due to a fight over compensation for historic mis-selling.

The company has faced complaints from consumers who have accused it of not checking whether their loans are affordable.

“There are still significant hurdles to overcome before Amigo can manage its bankruptcy record, but this information will help us move to the next phase to achieve the best possible outcome given the circumstances,” said Chief Executive Gary Jennison.

Amigo’s share price rose 117 percent in morning trade on Monday, although it is still down 80 percent since May, when the FCA rejected an earlier proposal.

In its most recent findings, Amigo said the board had concluded that there was material uncertainty about the company’s future. The company reported a pre-tax loss of £500,000 in the three months to December 2021, compared with a loss of £18.7m a year earlier.

The new scheme would offer creditors £97m. It would seek to raise an additional £15m through a rights issue for the scheme and fund new borrowing.

This month, Amigo announced that it has accepted a motion from Jennison to cancel a 9.5 million long-term stock award after criticism was raised at last year’s hearing.

Amigo’s struggles echo industry-wide troubles in recent years, as the regulator cracked down on so-called non-standard financial providers amid concerns about a debt-constraint cycle.

The number of active, high-cost, short-term lenders in the UK fell by almost a third between 2016 and the third quarter of 2020, according to FCA figures.