Amigo Holdings PLC (LSE:AMGO) said it will now lend under a new brand called RewardRate, offering “more affordable, responsible and flexible finance for underserved consumers who currently have few borrowing options”.
The new proposition, where it will offer personal loans and guarantor loans, still needs permission from the Financial Conduct Authority (FCA) to begin lending again, after a judge approved the latest version of its misselling claims compensation scheme last month.
Amigo said the compensation scheme is contingent on lending restarting by 26 February next year and it completing a successful equity raise by 26 May of that year.
In developing RewardRate, the management team “has taken learnings from Amigo's past to ensure a customer-centric compliant and responsible culture is at the core of the business as well as an improved underwriting process with enhanced affordability checks for customers”.
In 2020, the company was forced to make a £159mln provision for customer complaints for its old guarantor-lending offer, with more than 300 staff working solely on handling and processing complaints, and with the company later becoming the country's most complained about financial firm.
Under the RewardRate banner, the Bournemouth-based company said it will seek to “provide a pathway out of higher cost finance to cheaper credit” with the key feature being that those who make their loan payments on time can reduce their annual percentage rate (APR) by up to 15 percentage points.
The new personal loan starts at 49.9% APR while the guarantor product begins at 39.9% APR, with both products offering the borrower the opportunity to reduce the interest rate charged over time to equivalent 34.9% APR by making payments on time.
Customers can also freeze a payment once a year, with no penalties.
No new lending is to take place under the Amigo brand and guarantor loans of the stype issued before March 2020 “will not be sold again”, though Amigo will remain the name of the holding company.
Offering a comparison of its old and new loans, pre-2020 Amigo loans were offered of £2,000-£10,000 for one to five years at an APR of 49.9% to 18-75 year olds.
The new RewardRate guarantor loan will only be offered to borrowers aged 21 to 65, with loans of £2,000 to £5,000 over a two-to-four year term.
Customers will need to earn a minimum of £1,000 a month of net income from employment and to have been employed for a minimum of six months.
Amigo pointed to estimates that there are 12mln adults in the UK who cannot obtain a loan from a mainstream lender as they are credit impaired or who have low credit status or no credit history.