* Watchdog argued for a better deal for customers
* Amigo had warned it could collapse
* Company considering its options, including appeal
(Adds comments from judgment, analyst)
By Kirstin Ridley and Iain Withers
LONDON, May 25 (Reuters) - London's High Court has rejected
a rescue plan from subprime lender Amigo that would
have cut compensation payouts to customers for mis-selling
loans, sending the company's shares plunging more than 50% on
Tuesday.
Britain's Financial Conduct Authority (FCA), which opposed
the scheme in court, said it thought Amigo could propose a
fairer deal for customers.
Subprime lenders in Britain have been hit by a regulatory
clampdown in recent years that has led to a wave of claims, and
in some cases compensation payouts, for mis-selling loans. The
effect of the COVID-19 pandemic has added to the strain.
Amigo - which has 137,000 current customers and has lent to
500,000 people since 2005 - had applied to the High Court for
permission to cap payouts, saying a surge in claims threatened
it with collapse.
In his judgment, Mr Justice Miles said the company's counsel
had said an administration was both probable and imminent
without the scheme.
But he said he agreed with the FCA that Amigo did not face
an immediate liquidity crunch and urged the company to propose a
fairer deal that spread losses with other stakeholders.
Amigo's shares tumbled as much as 61% in early trading.
The lender said its board was reviewing all options
including an appeal after the court's decision.
"We suspect a potential sweetening of the terms must be
under very careful consideration to avoid an outright collapse
of the business into administration," Goodbody analyst John
Cronin wrote in a note.
The FCA said other finance firms should take account of the
judgment, adding it had "significant concerns" about schemes
being used to unfairly avoid paying redress to customers.
Amigo specialises in guarantor loans, providing finance to
customers with poor credit histories if they are guaranteed by a
friend or family member.
Rival Provident Financial quit its around
140-year-old doorstep lending business this month.
Amigo's plan had drawn criticism from politicians and
consumer groups.
Around 95% of votes cast by current and former Amigo
customers ahead of the court hearing were in favour of the
proposal.
Mr Justice Miles in his judgment said he agreed with the FCA
that customers lacked the necessary information or experience to
assess potential alternative options when voting on the scheme.
(Reporting by Kirstin Ridley and Iain Withers; editing by
Rachel Armstrong, Mark Potter and Jason Neely)
