A boardroom row has gone public after the founder of sub-prime lender Amigo quit the board and accused the company of “committing slow-motion suicide”.
Amigo lends money to people with a poor credit rating, but who can offer family and friends as a back-up to guarantee any missed repayments.
Major shareholder and founder James Benamor left and published a highly-critical blog.
The company hit back, saying parts of it were “fundamentally incorrect”.
In January, Amigo – which controls 80% of the UK’s guarantor loan market – put itself up for sale.
Numerous complaints have been submitted by customers who feel they should never have been given a loan.
The sub-prime lending sector as a whole has faced a blizzard of complaints from customers who believe they were approved for loans which they could never afford to repay. This has led to the demise of some of the biggest names in the sector, such as Wonga.
Amigo requires security from borrowers, through the demand for a guarantor. The loans involve friends and relatives being asked to pay off the debt, if the original borrower fails to do so.
However, complaints have been made as to whether these loans were affordable when made, many of which are being upheld.
Mr Benamor claimed that the company “must immediately cease lending, collect in the book, pay down debt, and proceed directly to judicial review [of these decisions by the Financial Ombudsman Service]”.
The company hit back, saying this “binary analysis” of the situation was wrong.
“The company monitors its loan book regularly and has concluded…that it does not have a systemic problem,” it said in a statement to investors.
Whether Amigo went to a judicial review or not was key to the future impact on people’s compensation claims in the future, according to debt adviser Sara Williams, who writes the Debt Camel blog.
The company’s share price was down by about 27% in the first half of the day.