Last checked at 
(Alliance News) - Amigo Holdings PLC on Tuesday laid out plans to finally resume new lending, after a hiatus of about two years, though under a new brand name.
Amigo shares were 2.5% higher at 5.43 pence each in London on Tuesday morning. The stock had been up 17% shortly after market open.
Amigo plans to lend under the RewardRate brand, offering two types of financing - a guarantor loan and a personal loan.
No new lending will take place under the Amigo brand, the company said.
"The name Amigo will continue to be part of the regulated lending entity, Amigo Loans Ltd, as well as the listed holding company Amigo Holdings PLC," it added.
Amigo paused all lending in November 2020 due to the Covid-19 pandemic. It had then agreed with the UK Financial Conduct Authority that it would not lend again with regulatory approval.
The FCA said Amigo would only be permitted to lend again without first passing a series of conditions. The Bournemouth, England-based firm needed a new business scheme to get a watchdog green light. This occurred in May.
The redress proposal got UK high court approval last month. The scheme was to settle customer claims following probes from UK regulators into mis-sold loans.
A year earlier, the court rejected a previous scheme to settle compensation claims.
In addition, Amigo on Tuesday noted it needs to meet "certain threshold conditions" set out by the FCA, its new lending system needs to pass the regulator's outcomes testing and Amigo must also deal with any other issues "to the FCA's satisfaction".
Tied to the court backing for the new business scheme, Amigo must successfully complete an equity raise by May of next year.
The company said on Tuesday: "Amigo has agreed a GBP35 million cap on net new business lending before the proposed capital raise is completed. The GBP35 million of planned new lending is being funded by internal resources."
The new RewardRate-branded personal loans will carry an annual percentage rate - meaning yearly interest - starting at 49.9%. The guarantor loans will have an APR starting at 39.9%. The loans will be aimed at those that are "underserved" - meaning they cannot obtain a loan from a mainstream lender. This includes those with a poor credit or have no credit history.
The company added: "Under the current management team, which has been working since September 2020 to fix the problems of the past, Amigo has a stated purpose to provide those with few options to borrow the opportunity to achieve financial mobility. Today, people face credit exclusion on an unparalleled scale in UK credit markets following the departure of specialist lenders from the sector, at a time when changing economic fundamentals, including the growth of the gig-economy and the aftermath of Covid, have led to rising demand.
"Amigo intends to play a significant role in supporting higher levels of financial inclusion in society. There are challenges for new firms seeking to serve this market in the form of high barriers to entry - set up costs such as technology infrastructure, compliance and distribution are high. Amigo has over 15 years' experience in the guarantor loans market and an established infrastructure, including data analytics and distribution. We have learnt from the mistakes of the past and intend to put our infrastructure and institutional knowledge of the specialist lending market to good use - so that people with few options have the opportunity to achieve financial mobility."
The lending system differs from the old "Amigo Loans 1.0" financing it once provided. The minimum age for borrowers has been lifted to 21 from 18. Where income is received from employment, a minimum of GBP1,000 is needed, compared to GBP800 previously.
Under RewardRate, customers can pause on a payment once a year without a penalty. Such a provision was not available in Amigo Loans 1.0. Borrowers are also rewarded with interest rate reductions should they make payments on time.
By Eric Cunha; ericcunha@alliancenews.com
Copyright 2022 Alliance News Limited. All Rights Reserved.
