Now car loans face a probe at Provident

SHARES in Provident Financial took another hit as it revealed it is being probed over possible mistreatment of customers.

The Financial Conduct Authority is investigating the ailing lender’s Moneybarn division, which loans cash to low-income customers who want to buy a car or van.

It is another crisis for the company after an IT disaster in its doorstep lending arm, a separate investigation into its credit cards and the death of its chairman.

Yesterday its shares dived 10.2pc, or 89.5p, to 790.5p. The fall follows two previous crashes and means the lender’s value has dropped by almost 75pc – or £3.4bn – since June.

It is a further embarrassment for fund manager Neil Woodford, who owns 21pc of the company and has suggested that Moneybarn will be a lucrative moneyspinner in coming years.

The Provvy’s woes prompted Woodford to issue an unprecedented apology to investors in September, saying it had been a ‘really difficult’ time.

‘I’m very disappointed with the short-term performance and, indeed, have been criticised for it. And I think it’s right I’m criticised,’ he said.

The FCA is now examining claims that Moneybarn did not properly check that customers would be able to afford to repay their loans. Investigators are also looking at how borrowers were treated when they got into financial difficulties.

The Provvy’s woes began when it attempted to modernise its appointment scheduling system for door-to-door debt collectors.

But a botched IT upgrade meant staff were sent to the wrong houses or at incorrect times, an estimated 3,000 selfemployed debt collectors quit when they were forced to take full-time staff contracts and chief executive Peter Crook resigned in disgrace.

The FCA said it was also investigating potential mis- selling in the credit card division, Vanquis Bank, which has 1.5m customers.

Manjit Wolstenholme stepped in as chairman to try to steady the ship but she died suddenly last month at just 53.

Sources close to the business said it has received a letter from the FCA about the Moneybarn probe, but it is still waiting for full details.

A Provvy spokesman said: ‘The FCA has commenced an investigation into Moneybarn in relation to the processes applied to customer affordability assessments for vehicle finance and the treatment of customers in financial difficulties.

‘The group aims to act responsibly in all its relationships, and to play a positive role in the communities it serves.’

And its interim executive chairman Malcolm Le May said: ‘We take this matter very seriously.

‘A relationship of trust with our customers and regulators is central to our business. I am determined to ensure that everyone who works for the group understands the importance of treating our customers fairly.’

Moneybarn was given FCA permission to lend in June last year and has since been in discussions with the watchdog about how it can improve its service, the company said. The car finance division had 49,000 customers at the end of September, and £362m of debt on its books.

The lender typically offers loans of up to £25,000 for between two and five years, at interest rates around 33pc.

The FCA declined to comment.