Shares of Amigo Holdings tanked on Tuesday after the High Court rejected a rescue plan by the guarantor lender that would have seen compensation payments capped.
Amigo had put forward a plan that would see its creditors get less compensation for misselling than they are owed. It argued that if the scheme of arrangement was not approved, it would go bust and claimants would be left with nothing at all.
Despite being approved by most of its creditors, the rescue plan was rejected by the High Court.
The judge said in his ruling: "The FCA expects the directors to continue to explore and promote a restructuring which fairly allocates the benefits and losses among the various stakeholders. I agree with that, and would urge the directors to continue their efforts to promote a suitable restructuring."
Amigo - which was charging a representative APR of around 50% - said the board is now reviewing all options, including an appeal.
Chief executive Gary Jennison said: "Amigo is incredibly disappointed that the scheme has not been approved despite the 74,877 customers who voted in support of the scheme, representing over 95% of those who voted. We are currently reviewing all our options and will provide an update at the earliest opportunity."
The Financial Conduct Authority, which had already made clear that it opposed the scheme on the basis that it was unfair, said: "The FCA has, through its continued engagement with Amigo and participation in the Court hearing, sought to get a better, fairer deal for Amigo’s customers due redress. We believe that a fairer compromise could have been offered to customers, but was not.
"The FCA considered it necessary in this case to share with the Court its view that the scheme as proposed was inherently unfair, as it placed a disproportionate burden on customers, as opposed to shareholders and bondholders, to keep the company afloat."
The FCA said it believes Amigo can propose a fairer scheme to customers. "It should also ensure that its customers are fairly represented and advised on alternative proposals for a scheme," it said.
At 1318 BST, the shares were down 52% at 9.00p.