Provident Financial to close high interest doorstep lending business
Provident has offered doorstep loans for more than 140 years and withdrawing from the market will put 2,100 jobs at risk.
Provident typically offers loans to people with poor credit histories who struggled to borrow money elsewhere. Cash loans are delivered to customers’ doorsteps, with debt collectors then visiting customers’ homes each week to collect cash payments.
The doorstep lending business had been struggling even before the coronavirus pandemic, losing £21m in 2019. However, those losses expanded dramatically during 2020 to £75m, according to financial results published today.
Provident also faced a wave of mis-selling complaints by customers, partly driven by claims management companies. In March, Provident warned that its consumer credit division could collapse into administration because of the deluge of compensation claims.
The company has launched a ‘scheme of arrangement’ in order to address the issue of rising customer complaint volumes. The group has committed £50m to fund claims under the scheme and will cover further scheme related administrative costs of approximately £15m.
The doorstep lender also revealed it was facing an investigation by the Financial Conduct Authority into a number of issues, including whether it carried out proper affordability checks before lending to borrowers.
Malcolm Le May, Provident Financial chief executive officer, said: “In light of the changing industry and regulatory dynamics in the home credit sector, as well as shifting customer preferences, it is with deepest regret that we have decided to withdraw from the home credit market and we intend to either place the business into managed run-off or consider a disposal.
2It is anticipated that the cost to the group of a managed run-off or a sale would be broadly similar. As a result, PFG will no longer offer any ‘high-cost’ products and we will not be issuing any high-cost or home collected credit products from any CCD entity in future.”
Provident said it plans to continue to operate in the ‘mid-cost’ unsecured personal loan market and offer loans to ‘financially underserved’ customers. Its personal loan division Vanquis Bank made £38m last year, while its car finance business Moneybarn brought in £10m.