Amigo, a struggling high-cost lender, was excused from paying a £73 million fine because it was unable to do so.
According to the Financial Conduct Authority, the company did not properly assess borrowers' ability to repay their loans. As a result, many of them had little chance of doing so.
Amigo almost went out of business as a result of the mis-selling, which resulted in a sizable compensation bill.
A fine, according to the FCA, would have put Amigo through "serious financial hardship.".
Instead, it criticized the company in public.
"The lessons that needed to be learned," according to Amigo, were fully accepted.
Even though "the serious failings in this case warrant a substantial financial penalty," the FCA claimed that a fine would have hindered Amigo's ability to pay out millions of pounds in compensation to customers under a scheme of arrangement approved by the High Court.
The size of the fine, according to debt expert Sara Williams, who runs the Debt Camel blog, "demonstrates the enormous scale of the Amigo mis-selling.".
According to her, the company made few checks on large, expensive loans given to borrowers in need of money. It begs the question of why FCA supervision so utterly failed the Amigo customers, and how the FCA handled this.
The FCA should "reconsider whether these loans are just too dangerous and should be banned," she said, adding that other smaller guarantor lenders have experienced comparable issues.
People with bad credit histories could apply for loans from Amigo, which required them to use friends and family as guarantors and charged interest rates as high as 49%.
However, thousands of complaints from borrowers who claimed the business had missold them loans ultimately resulted.
According to the FCA, Amigo did not have adequate procedures in place between November 2018 and March 2020 to evaluate the affordability of borrowers and those who served as their guarantors.
According to the FCA, this increased the risk of consumer harm for both guarantors and borrowers.
Mark Steward, executive director of enforcement and market oversight for the FCA, stated that Amigo "failed to assess properly the affordability of its lending, especially to vulnerable consumers.".
That meant that one in every four of Amigo's loans required guarantors to step in and make payments to help struggling borrowers.
According to the watchdog, Amigo effectively put its own business interests ahead of its responsibility to follow the law and protect customers from unaffordable loans.
Additionally, it claimed that Amigo kept insufficient records, making it unable to respond to inquiries in a satisfactory manner.
Amigo's careless deletion of the former staff members' email accounts also complicated the investigation.
The company stopped lending in 2020, and £345 million in compensation claims threatened to bankrupt the company until it reached a settlement last year that was approved by the High Court in May.
Amigo stated that as the business works to secure its future, the conclusion of the FCA's investigation marked an "important milestone.".
Danny Malone, chief executive of Amigo, said, "We fully accept the lessons that needed to be learnt for the future and our focus remains on rebuilding a business that delivers better outcomes for customers, backed by stronger lending.".
In order to continue lending, it is looking for investors to inject £45 million in new capital into the company. It resumed lending in October 2022.
The business must raise the money by May 26 in accordance with the High Court-approved scheme of arrangement, or it will be shut down.
The news that Amigo had avoided the fine caused its shares to rise by 25%, but the company's shares are still trading at just 3.27p, down from almost 300p when they last traded.
