Amigo Loans plans to offer new products after the British subprime company was forced to suspend its loans following a deluge of complaints.
The Bournemouth-based company aims to launch two loan products, a personal loan and a guarantor loan, under a new brand, RewardRate. Borrowers will have the option to reduce their annual interest rate by up to 15 percentage points.
The plan is subject to clearance from the Financial Conduct Authority to allow Amigo to resume lending, after it was halted in November 2020 following a backlog of complaints and uncertainty caused by the pandemic.
“We’re getting a good engagement with the FCA,” chief executive Gary Jennison said. “There’s a long list of things we need to satisfy them, but hopefully it’s not much longer.”
The return to lending comes after Amigo warned last year that it could go bankrupt if it cannot resume operations. Amigo, which lends to people with bad credit histories, has been hit with complaints from borrowers who said it failed to properly check whether loans were affordable.
Amigo shares were up 19% in early trading on Tuesday.
Amigo plans to offer a personal loan that starts with an annual percentage rate of 49.9%, while the guarantor loan starts at 39.9%.
Both products will give borrowers the option to reduce the interest rate to 34.9% APR by making payments on time. Customers can also freeze a payment once a year, without penalty.
Amigo said loans taken before March 2020 would no longer be resold as the legacy book continued to run out. It will cap net new lending at £35m before proceeding with a capital raise.
The lender last month proposed a new compensation scheme for borrowers, which has received High Court approval. Amigo’s previous compensation plan, or “scheme of arrangement”, was rejected by the court and the Financial Conduct Authority last year because it limited payouts.
The UK regulator has cracked down on so-called non-standard finance providers in recent years in response to concerns about rising consumer debt.
The number of active short-term high-cost lenders in the UK fell by almost a third between 2016 and the third quarter of 2020, according to FCA figures. Meanwhile, Wonga, once the UK’s biggest payday loan provider, filed for administration in 2018 after a flurry of customer complaints.