The UK High Court has rejected a rescue plan from subprime lender Amigo that would have cut compensation payouts to customers for mis-selling loans, sending the company's shares plunging more than 50% today.

Britain's Financial Conduct Authority (FCA), which opposed the scheme in court, said it thought Amigo could propose a fairer deal for customers.

Subprime lenders in Britain have been hit by a regulatory clampdown in recent years that has led to a wave of claims, and in some cases compensation payouts, for mis-selling loans.

The effect of the Covid-19 pandemic has added to the strain.

Amigo had applied to the High Court for permission to cap payouts, saying a surge in claims threatened it with collapse.

The lender said its board was reviewing all options including an appeal after the court's decision.

The FCA said other finance firms should take account of the judgment, adding it had "significant concerns" about schemes being used to unfairly avoid paying customers redress.

Amigo specialises in guarantor loans, providing finance to customers with poor credit histories if they are guaranteed by a friend or family member.

Rival Provident Financial quit its around 140 year old doorstep lending business earlier this month.

Amigo's plan had drawn criticism from politicians and consumer groups. Around 95% of votes cast by current and former Amigo customers ahead of the court hearing were in favour of the proposal.

The court said in its judgment it agreed with the FCA that Amigo did not face an imminent liquidity crunch and urged the company to propose a fairer scheme that spread losses with shareholders.

The court said customers lacked the necessary information or experience to assess potential alternative options when voting on the scheme.