I started Amigo in 2005. It was the company I needed to borrow from when, as a teenager, I had started my first businesses. With guarantor-backed loans not a thing at the time, I had to wait outside Radio Rentals as my aunt signed a 12 month contract on a ludicrously overpriced PC for me, pretending it was for her. As I discovered later, I was like many financially excluded people in the UK, “bad on paper” but trusted by my friends and family and in need of a leg up onto the ladder.

We built Amigo to be a consumer champion. Sharing a board member with the debt management charity Stepchange, we visited their offices and studied their process for setting up money management plans which were affordable. As we developed Amigo’s own affordability process, we based it on the process Stepchange had in place but added electronic verifications and a layer of additional cross questioning. Our belt and braces approach was a huge competitive disadvantage in a market where banks and other lenders were doing little to nothing, and we campaigned hard for clarity and enforcement of standards. Over the following years, our campaigns made it onto the front page of The Sun, The Daily Mail, and others.

In 2016, after I had stepped down as CEO, the Financial Conduct Authority (The “FCA”) requested detailed information on Amigo’s pre-payout processes, conducted site visits, and required an independent ‘Section 166’ report on affordability assessments. No major issues were found and many parts of the process we had pioneered became the expectation for other guarantor loan companies. In 2017, Amigo was authorised by the FCA. Throughout the decade, the Financial Ombudsman Service (The “FOS”) adjudicated on a tiny trickle of complaints from customers on the subject of irresponsible lending. The decisions were almost always in Amigo’s favour.

In 2018, Amigo floated. The FCA stood by, knowing that investors were buying in believing that the company was making loans that would be enforceable. Like many investors, I took the regulator’s stance at face value. I sold the absolute minimum I could sell, and at the same time converted a loan of around £200m into shares, effectively making me the largest single ‘buyer’ of stock in the float.

In spring 2019, the FOS had a meeting with senior Amigo executives and informed them that they had changed their stance on irresponsible lending, and that Amigo should too. Previously, a commitment to a feasible budget plan based on a combination of verified and self certified data was sufficient. Now, irrespective of the budget plan, any indication that the customer had been living beyond their means (or might do in the future) became a reason to retrospectively refund all interest payments as far back as 2010. Loans to customers with no credit problems, but who had an overdraft or a credit card which had not been cleared in full at the end of each month, became ‘irresponsible’ loans- as did loans to virtually everyone else. Later the FOS issued figures showing that, true to their word, they did actually uphold 90% of all complaints relating to guarantor-backed loans in 2019.

The Amigo board had a choice. There is a judicial review process, whereby a company can test the FOS’s adjudications in court. Amigo were, and still are, within their rights to challenge the FOS’s new position. On their side they have the FOS’s previous position, the S.166 report, and years of precedent. Or, if they agreed that almost all loans in their book had been made irresponsibly, they should have informed shareholders that they had now taken this position, made a provision for well over £1bn of redress, ceased lending and put themselves into administration. FCA guidance is very clear that, where systemic problems are recognised, customers who have not complained should be treated in the same way as customers who have complained.

What the Amigo board did next was neither of those things. Instead, they began refunding almost all complaints received, but continued to lend on a virtually unaltered basis, hoping no one would notice. When I came back to the board at the end of 2019, it was because I could not understand how Amigo seemed to have such high redress rates, but was still paying out on target. My first action as a Director was to personally audit the most recently lent and refunded loans. I found that Amigo had, for six months, been lending almost entirely in a way that matched their own complaints team’s definition of ‘irresponsible’. I thought that proving this would force the board to take adequate action. It did not.

During my short time back on the Amigo board, I have witnessed a company committing slow motion suicide, whilst playing out the script of Brewster’s Millions. Within one year of my stepping down from the board, the most efficient company in the FTSE 250 had become a cash cow for consultants, lawyers and suits, all of whom had an interest in keeping the gravy train running for as long as possible, but no interest in the company being honest with shareholders or customers about the situation it was in. The recent formal sale process, which I voted against, is in my opinion nothing more than yet another handy excuse to delay necessary action, and to further restrict the flow of information to shareholders. I could not, in good conscience, remain on a board that is so thoroughly mismanaging a company that I love.

Amigo’s experience marks a new chapter in the experiment that is the FCA and the FOS. This chain of events has proved that unchecked regulatory power produces a market where investors cannot safely build companies that make affordable, lower interest loans. Companies that require hundreds of millions of pounds of investment and lose money for years as they build a loyal customer base. Instead they have limited borrowers to short term high interest fly-by-night lenders and unregulated finance.

Amigo’s board have an obligation to customers and shareholders to recognise this, and to be clear about the company’s current situation. They must immediately cease lending, collect in the book, pay down debt, and proceed directly to judicial review. If it is found that the FOS and FCA’s previous view is correct, shareholders will get back a good proportion of the money that was paid at float. If not, each customer will be due a payout equaling a fraction of the interest they have paid, as small compensation for a future of financial exclusion.