Hi guys sasha here today the fca has placed new restrictions on amigo loans. There have been other restrictions on them recently, i'm going to cover all of that. I'm going to tell you exactly what's happening exactly what has been happening with the company, but today they've put what is called an asset, voluntary requirement or a v wreck on the company which prohibits amiga loans from being able to make payments to their directors or dividends. To their shareholders, without the explicit permission and approval of the fca, which is quite a rare and unusual thing, and certainly noteworthy, so what does that mean? What does that mean for the company? What does this mean for the customers of the company and what does that mean in terms of the broader picture of the guarantor loan market? Let's dive right in, let me tell you everything there is to know about it.

Now, just a little bit of background james bennimore founded amigo loans in 2005, working out of his own kitchen. According to him, the company went really really quickly from a small startup lending locally to a big national guarantor lender now guarantor loans, if you're not familiar with the type of business or, if you're not quite sure, exactly what it means. It is a type of lending that is available to people who have really bad credit or no credit to speak of. Let's say they are new to country.

The young people, who don't have credit built up or they've, had issues with credit in the past and the way that these loans work is instead of just assessing the risk of the particular person and lending them at a really really high interest rate. Because that's what you would have to lend to people if they have no or really bad credit history, what they can do is they can go and find somebody else who trusts them. Let's say somebody who's a family member or somebody who is a very, very good friend who will essentially vouch for their risk and, if they're not able to repay their debt, then this other person will be liable for the debt. Instead, that's what the guarantor principle is.

Anyway, within a relatively short space of time, amigos began basically forming this entire guarantor loan industry and for a long long time for like 15 years, they have completely dominated the space. They controlled a huge proportion. The vast majority of the entire market for the duration of this period after 10 years of running the business james bennimore stood down as ceo of the company in 2015 and appointed glenn crawford, which was part of a long-term strategy to an ipo which the business did. Actually get to in june 2018, when it was valued at 1.3 billion pounds, which is a huge valuation for a financial services company of that type.

Now, since then, things haven't been going quite so well. Over a period of a few years, the fca had somebody called andrew bailey in charge, and they had a very, very clear agenda. They wanted to go and take out all the unscrupulous lenders, all the people with very questionable lending policies. The people who charge you thousands of percent of apr and they have done a stellar job at doing that over those few years in the run-up to what's been happening recently, the fca has gone out and taken out one payday lender after another, pretty much decimating the Industry, they started off by exerting incredible pressure, putting regulatory requirements changing the way that these companies had to operate changing the way they had to make assessments for lending going and scrutinizing the way that lending practices were actually implemented by these companies and began killing them off.

Wonga was one of the very first companies to go and, in the end, pretty much all the major payday loan companies and companies charging extortionate rates of interest on loans have died, there's a few remaining just clinging on, but their turn is gon na come in due Course anyway, so after all of that happened, the next sort of type of lending down from the really high interest loan companies that have already been killed were the guarantor loans and that's when their turn came on the first of june, it was announced that, as of The 29th of may, the fca has launched an investigation into the way that amigo loans has been conducting their business they're, specifically interested in three main components of that they're apparently interested in the way the credit decisions were made and the way that customers were lent money To in terms of deciding who does and doesn't get the loans that they applied for the second part that they were interested in is repeat lenders to the same customers. So what they're saying is a bunch of customers who were given an amiga loan would then go and get a second, a third and so on and as a result, they would get themselves into debt and into issues which they didn't have before. Just because amigo allegedly would make it far too easy to go and get those incremental top-up loans. The third thing they were interested in is the way that affordability for these loans was assessed.

Now it's a slightly different thing here, because affordability in a guarantor loan is actually quite difficult to estimate. Because are you trying to understand the affordability of the person? Borrowing, are you trying to understand the affordability of the person who is the guarantor? Are you doing both? Are you doing some kind of hybrid anyway? What they've been saying is that affordability rules that came into force in november 2018 have not been implemented right, maybe allegedly that's what the subject of the investigation is they're. Looking into those things to try to understand whether amiga loans has actually been doing everything by the book now as a result of this together with some other things, i'm going to cover just in a second, the share price has collapsed when amiga loans, ipo'd their shares, Were valued at 2 pounds? 90.! That's that's a lot! That's what gave the company the valuation of about 1.3 billion at that point in time and at that point in time james bennimore, who apparently allegedly held something over 60 percent of the company. His stake would have been worth many hundreds of millions of pounds, but as of today, the share prices collapsed to just 9.7 pence, a tiny, tiny fraction of what it was now.

Amigo loans have had issues with the regulators for some time. In august 2019, their shares fell over 50 percent, as it became apparent that the regulator had already had issues with the way they were conducting their business and wasn't the biggest fan of their business model as the pandemic unfolded. Amigo loans decided to stop their lending to customers altogether, and only three months later, it was announced that the investigation is ongoing, which means that 2020 has been an extra difficult year for the company. A boardroom struggle resulted in one ceo being replaced by another ceo and only a very short time later.

That ceo was let go to be replaced by the original ceo who was replaced in the first place. All of that was a result of james bennemore, allegedly trying to take control of the business back after letting go of that control. Several years prior reports and various finding papers show that james bennimore and his richmond holdings group have owned over 60 percent of amiga loans. All the way through to the ipo and from then until 2020, even when he wasn't actively day-to-day involved in the business, but several different legal papers and agreements and things that happened during that period when the company was going through.

Each ipo have apparently precluded him from actually having absolute control of the company, despite having more than 50 of the shares. As a result, he couldn't go and instill himself back as ceo, even though a lot of newspapers and a lot of reports and the media have suggested that. That's what he's been trying to do for the entirety of this year and as a result, in august this year, james bennimore and his group have begun massively selling the shares they threw in the towel and they decided that, even though the shares were already worth a Tiny tiny fraction of what they were worth before they needed to get rid. So apparently, during that period they sold over 50 of the total number of shares in the company that exist, which is a phenomenal number, and it still yielded them quite a lot of money.

Even if it was hundreds of millions less than if they did the same thing just two years earlier now, it really isn't a good sign when the major shareholder goes and just dumps all of their shares at a really really low price to a lot of people. It would probably seem like they don't have much hope and they don't have much belief in the fact that the company is going to turn things around and actually go and climb out of this hole. Now the really interesting thing is he hasn't sold. All of his shares he's actually kept just enough to have over 10 of the shares remaining, and this is a really interesting thing, because if you look deep into the findings that the company makes regularly as a listed company on the market, that is because they have To have at least a 10 stake in the company in order to be able to appoint a non-executive director to the board, which means that they are able to have somebody present and all the board meetings have all the insider information about what's happening in the company.

So that allows them essentially uh that one seat at the table not to be able to actually in make any decisions or influence decisions, because there's only one seat but to be privy to everything that's going on within the business. So what is happening right now now? I mentioned right at the beginning of the video that the company has had a restriction placed on the transfer of assets out of the business, that is, payments in normal english speak um and that is specifically to the directors of the business and to the shareholders. So, basically, the two critical parts of the business they get a say in the running of the company, now the reason that normally takes place in this case. I am not privy to the rationale behind the fca decision, but often in these kinds of circumstances with other companies.

The reason why this might happen is if the fca or any other regulatory body, who has the capacity to put these types of limitations in place, suspects that the company may, for example, have a collapse impending or maybe have some kind of financial troubles down the line. They may place such a restriction so that money can't be taken out of the business before the business collapses, so that if there is redress to customers, that has to be done. If there is interest that has to be repaid. If there is anything like that that has to be refunded to customers, then there are adequate cash funds in the business to be able to make those payments.

Because what happens in some cases when companies collapse is the owner of that company will, at the very last minute, go and pay themselves a huge dividend or something else like that? Take all the cash out of the business, then let it collapse because they've already gone and taken all the earnings. I am not saying that this is what's happening in this case, because i actually do not know. I am not in any way privy to that information. I'm just saying something that is very general about how this can and does happen in other situations.

Now, if you look at their latest annual report, which goes up to the 31st of march 2020, there is one number that is really really fascinating, that is in the level of customer defaults. Now everyone's been focusing on some other parts of the report which i'm going to get to in just a second, but remember this is before the main part of the pandemic even really struck. This is before anyone had a chance to begin missing payments. This is before anyone had a chance to go on furlough to lose their job or anything like that.

So that's fascinating. The numbers get worse from here, though. The same report shows the company made a 27 million pound loss due to the impact of the losses that they're expecting to incur in the future, because they have to account for them at the point at which they expect those losses to actually occur. Under recent changes.

To the way financial reporting happens and because of the provisions for the payout on claims, which i'm gon na go into a little bit more detail here now, according to the company, they were actually on target to make quite a sizable profit. This year of about 75 million pounds, if it wasn't for these claims, but what this does mean is that if you do the math, it means that the total value of the claims they're expecting to have to pay out as of march. This year is 102.7 million pounds, which is an astonishing number. It is higher than their profit was in the entirety of 2019..

Now, if you're not aware, amigo loans has been under fire by the regulator and by various other bodies, for the fact that they have had a really big spike in claims. For the same reasons that i mentioned earlier, customers are complaining that they were miss sold the loans there were missile top-ups to their loans, where they were sold them far too easily, without making proper affordability assessments without making proper decisions on whether the customer is credit worthy. All of this is an allegation. All of this is allegation by these customers or allegations by the fca.

I do not know either way. I am just reporting on stuff that is publicly available in the media publicly available in various filing papers, but anyway, this is. This is what's going on in the background. These cases have begun snowballing through this year and the number i mentioned earlier as of a finding that i saw just a few months ago.

I think it was in june this year that number's gone up to. I think 116 million total, so this number is still staying really really high. Now, after making this b-rec announcement today because they are legally obliged to do so, the company actually made a one line. I'm not exaggerating a one line, clarification statement and i have it right here, i'm going to read it to you.

They said amigo has adequate liquidity to continue to fund operations and support its customers. The board continues to be focused on addressing amigos legacy issues. Restoring confidence in its corporate governance and building a suitable business for the long term. Now i am not casting any allegations here or making any insinuations or deductions here, but from my personal experience, based on other situations like this or not like this in the past, when a company goes and tells you that everything is okay and that they have liquidity In a public announcement in a lot of cases, the only reason you would ever make such a statement is because things are exactly the opposite.

That's just my personal opinion. That's just the kind of things that you would expect a company in real trouble to be coming out and saying now tell me if you have a different opinion below in the comments. If i missed something out, if i forgot something go make sure you go and correct me if i got something wrong, i really really appreciate you watching. Thank you so much for watching and if you enjoyed this video, please make sure you go and hit the like button and subscribe to this channel, because i'm going to make a lot more videos like it in the future.

Once again. Thank you so much for watching and i'll see you guys later. You.