Amigo Holdings PLC (LON:AMGO) has warned that profits will be hit by an increased provision for resolving complaints as it has continued to receive ongoing high numbers from claims management companies.
Given continued uncertainty, the guarantee loan provider does not anticipate lending will restart this year.
The company said it has reviewed and reached a decision on all 25,571 complaints included in a ‘voluntary requirement’ evaluation by the financial regulator, though final responses still need to be made for 2,517 of those complaints.
Having settled around £47mln of redress to customers, split 60%-40% between cash payments and loan balance adjustments, Amigo said it was working with the Financial Conduct Authority and another third party on how to calculate redress for certain of these remaining complaints.
The company said it expects to lift its provision for complaints to above £150mln, leading to at least an £85mln hit to full-year profits, having guided to a provision of £116.4mln early this year.
Quantifying the exact provision was difficult, Amigo said, given the increase in complaints received, especially from claims management companies and an updated figure will be given alongside half-year results on November 26.
With cash collection said to remain robust, there was unrestricted cash of circa £140mln held by the loans division.
“While operationally we have turned a corner with complaints, the sustained volume we are seeing will have an impact on the complaints provision going forward,” Amigo’s new chief executive Gary Jennison said in a statement on Tuesday.
“We have placed the provision under review and a full update will be provided at our half-year results. Working with our regulator to fix the complaints situation is our number one priority and this is non-negotiable.”
Shares in the company fell 13% to 7.47p in the first hour of trading.