Amigo, a financially troubled high-cost lender, was excused from paying a £73 million fine.
As a result, many borrowers had little chance of being able to repay their loans, according to the Financial Conduct Authority, who claimed the company failed to conduct adequate affordability checks on borrowers.
Amigo almost went out of business due to the massive compensation bill brought on by the mis-selling.
A fine would have put Amigo through "serious financial hardship," according to the FCA.
Instead, it publicly criticized the company.
Amigo declared that it had fully learned "the lessons that needed to be learned.".
The FCA claimed that even though "the serious failings in this case warrant a substantial financial penalty," a fine would have hurt Amigo's ability to pay out millions of pounds in compensation to customers under a High Court-approved scheme of arrangement.
Sara Williams, a debt expert and blogger at Debt Camel, said that the size of the fine "demonstrates the enormous scale of the Amigo mis-selling.".
According to her, the company issued big, expensive loans to borrowers with bad credit with few checks. It begs the question, "How did the FCA handle this? Why did FCA oversight fail the Amigo customers so miserably?".
Similar issues have been experienced by smaller guarantor lenders, so "the FCA should reconsider whether these loans are just too dangerous and should be banned," she said.
Amigo provided loans to people with bad credit histories, charging them interest rates as high as 49.9 percent and requiring them to use friends and family as guarantors.
But thousands of complaints from borrowers who claimed the company had missold them loans ultimately came in.
Between November 2018 and March 2020, according to the FCA, Amigo did not have adequate procedures in place to evaluate the affordability of borrowers and those who served as their guarantors.
This increased the risk of consumer harm for both guarantors and borrowers, according to the FCA.
According to Mark Steward, the FCA's executive director of enforcement and market oversight, Amigo miscalculated the affordability of its lending, particularly to vulnerable consumers.
Thus, one in every four loans made by Amigo required guarantors to step forward and make payments in order to help struggling borrowers.
Amigo effectively put its own business interests ahead of its responsibility to follow the law and protect customers from unaffordable loans, according to the watchdog.
Additionally, it claimed that Amigo failed to keep adequate records, which prevented it from giving adequate answers to inquiries.
Amigo's careless deletion of the email accounts of former employees also interfered with the investigation.
The company stopped making loans in 2020, and compensation claims totaling about £345 million threatened to bankrupt the company until it negotiated reduced redress last year, which the High Court approved in May.
According to Amigo, the company's efforts to secure its future have made the conclusion of the FCA's investigation an "important milestone.".
"We fully accept the lessons that needed to be learned for the future and our focus remains on rebuilding a business that delivers better outcomes for customers, backed by stronger lending," said Danny Malone, chief executive of Amigo.
It resumed lending in October 2022, but is now looking for investors to give the company new funding totaling £45 million so that it can keep lending.
It has until May 26 to raise the money, or the business will be shut down, according to the High Court-approved scheme of arrangement.
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, which is much lower than the nearly 300p level they reached five years ago.
