Controversial lender Amigo Loans is under investigation for potentially mis-selling thousands of pounds worth of debt to vulnerable customers.
The Financial Conduct Authority (FCA) has launched a fresh probe into the firm over concerns around its affordability checks for those who apply for loans.
The cash provider said that the investigation would focus on whether or not its credit checks on borrowers were carried out in line with lending rules that determine whether the customers will be able to pay the debt back.
Amigo Loans, which is based in Bournemouth, lends up to £10,000 to borrowers with poor credit scores at an interest rate of 49.9%.
Its requirement for guarantors can mean that friends and relatives are asked to pay off the debt if the original borrower fails to do so.
However, poor affordability checks to begin with could mean guarantors are at a higher risk of having to foot the bill.
Amigo was recently accused by its own founder of lending irresponsibly and failing to tackle an increase in the number of consumer complaints from those who feel they should have never been given a loan.
It joins a string of alternative lenders that have faced a deluge of complaints from customers who were wrongly sold loans over the past 5 years - a move which led to the demise of Wonga.
Earlier in the year, Amigo - which controls 80% of the UK's guarantor loan market - put itself up for sale.
Today's news comes just two months after rent-to-own retailer BrightHouse collapsed following an influx of compensation claims around affordability checks.
Julie Palmer, from corporate recovery business Begbies Traynor, said: " Coronavirus was the final nail in the coffin for BrightHouse."
The firm had been struggling with high levels of complaints in recent years, including paying £14.8m in redress back in 2017.
It had also been affected by the introduction of rent-to-own (RTO) caps in 2019 which limited how much interest and charges firms could pass on to customers.
