Amigo Loans Ltd (Amigo) is a UK-based guarantor loan provider that offers access to mid-cost credit to customers who often are unable to borrow from mainstream lenders due to their credit histories. In common with certain other lenders in the sector, and accentuated by the activity of case management companies (CMCs), Amigo experienced a significant influx of customer complaints in 2020, causing various challenges and a substantial contingent liability on Amigo’s balance sheet. Further, from March 2020, Amigo paused all new lending (except to key workers) and offered COVID-19 related payment holidays to customers impacted by the pandemic, resulting in a fall in revenue, a decline in customer numbers, and a reduction in the value of its net loan book.
To address these issues, a scheme of arrangement ('the Scheme') was proposed with past and present customers of Amigo, in their capacity as potential creditors to whom redress liabilities may be owed. Pursuant to the Scheme, Amigo will set aside a pot of funds out of which valid complaints are to be paid. On 30 March 2021, the English High Court (Sir Alastair Norris) granted permission for the single creditors’ meeting to be convened. With similar problems being faced in other parts of the non-standard lending sector, this case is being watched with interest by many.
The Scheme deals with any redress claims capable of being brought by a customer (ie a borrower or a guarantor) relating to a loan advanced by Amigo. It captures any type of complaints that a customer may lodge in respect of their loan, including but not limited to claims that Amigo did not perform the right affordability checks before a loan was extended. On top of redress liabilities, outstanding case fees incurred by the Financial Ombudsman Service (FOS) in its consideration of complaints referred to it, will also be compromised in the Scheme.
Under the Scheme, creditors will be invited to submit their claims though an online portal if they think they have a valid claim. The claims will then be assessed, and valid claims will be paid out of the Scheme funds. The Scheme is intended to distribute the Scheme funds in a way that is fair and equitable, with each creditor receiving a pro rata dividend in respect of their claim.
If approved by creditors and sanctioned by the Court, the Scheme will create certainty regarding Amigo’s exposure to redress claims, and thereby generate stability in the Group and enable Amigo to continue to trade and restart lending.
The Court agreed that the rights of the Scheme creditors were sufficiently similar that they could consult together with a view to their common interest. In coming to this conclusion, a number of potential differences were considered but ultimately dismissed, namely (but not limited to) the position of:
- borrowers and guarantors ('redress creditors') as against the FOS;
- redress creditors who are borrowers as against redress creditors who are guarantors; and
- borrowers who have an outstanding loan with Amigo (and would therefore benefit from set-off) as against borrowers who do not have an outstanding loan (and will therefore only receive a pro rata dividend of their redress claim in the Scheme).
These differences were insufficient to fracture the class. In the relevant comparator of administration, all of the Scheme creditors would be unsecured creditors to whom, on the basis of the estimated outcome statement, a distribution would be highly unlikely to be made. Further, both in an insolvency and pursuant to the Scheme, all liabilities within the Scheme's scope would effectively be treated identically. All Scheme creditors will have the same rights under the Scheme, such as the right to have their claim referred for adjudication, and the right to set-off any amounts owing to Amigo against their Scheme claim.
Virtual creditors' meeting
The creditors' meeting is planned to take place on Wednesday 12 May and, in light of the ongoing COVID-19 pandemic, will be held virtually. The twofold factors of the significant number of expected attendees (noting that Amigo has entered into 927,000 individual agreements with borrowers and guarantors since it started lending) and the need for the meeting to take place in a virtual setting has posed novel difficulties.
In order to comply with the requirements of Re Castle Trust Direct plc  EWHC 969 (Ch), the meeting must allow for 'a collective coming together for the purpose of consultation'. The court must be satisfied that there are 'no difficulties for participating creditors in their ability to hear, ask questions or express opinions at the meeting or otherwise have their ability to contribute to the business of the meeting impaired'. In order to meet these requirements, the meeting is due to take place by way of webcast (allowing the Chairman to speak and present slides), accompanied by a telephone facility which will permit Scheme creditors to ask questions and consult with one another. Creditors will also be invited to submit any questions they have in advance.
Sir Alastair Norris did not perceive any issues with the proposed meeting logistics. However, provided that the creditors approve the Scheme, the meeting's compliance with the Castle Trust requirements will be a subject for consideration at the sanction hearing (currently scheduled to take place on 19 May 2021).
In the weeks leading up to the convening hearing, a large number of emails were received from customers expressing an interest in attending the virtual hearing, including a portion of customers who raised objections or queries in relation to the Scheme and requested that their emails be brought to the Court's attention. This correspondence was raised at the hearing and included in evidence.
With the intention of providing the Court with an independent and objective account of the customer emails, Amigo also engaged an independent scheme assessor to impartially collate, consider and present customer feedback to Amigo and to the Court.
A number of customers and other members of the public attended the hearing, which was held via Microsoft Teams. Sir Alastair Norris invited customers who wished to express their views or ask questions to speak, an opportunity which several customers took. Sir Alastair Norris noted this feedback and, although he did not consider amendments to the scheme documentation to be essential, he was of the view that further clarification could be provided somehow to customers, particularly in respect of the six-month deadline under the Scheme before which customers need to submit their claims (referred to as the 'bar date'). Sir Alastair Norris was satisfied that the creditors' meeting could go ahead as a single meeting, with customers entitled to discuss the merits of the proposed Scheme among themselves through that forum.