Watchdog probe into Provident car loan division
TROUBLED LENDER Provident Financial said the financial watchdog has opened an investigation into Moneybarn, its car and van financing arm.
The Financial Conduct Authority (FCA) investigation will examine customer affordability assessments for vehicle finance and the treatment of customers in financial difficulties.
The Bradford-based sub-prime lender is already contending with lost income resulting from an FCA investigation into its Vanquis Bank.
Shares in the group fell 10 per cent to close at 709.5p.
Provident said: “Provident Financial Group aims to act responsibly in all its relationships, and to play a positive role in the communities it serves.
“The company will work collaboratively with the FCA to investigate the remaining concerns and resolve any outstanding related issues as soon as practicable.”
The FCA granted Moneybarn authorisation to conduct consumer credit activities in 2016, since which the watchdog has encouraged the firm to make a number of improvements, including to the way it deals with future loan terminations.
News of the investigation follows a brutal few months for Provident, which has issued a string of profit warnings, seen its shares tank and has had to announce the death of executive chairman Manjit Wolstenholme.
In October the firm revealed it would book heavy annual losses at its consumer credit business, but claimed that it is making progress with a turnaround plan.
As part of efforts to shore up the business, Provident launched a new home credit model in July with the aim of moving from selfemployed door-to-door agents to full-time “customer experience managers”.
Shares in Provident, which has around 2.5 million customers, have taken a hammering on the London Stock Exchange this year and it has fallen out of the FTSE 100.
Analyst Gary Greenwood at Shore Capital said: “For some companies, it never just rains but pours and this seems to be the case for Provident at present.
“Already stuck in a quagmire that is the badly handled restructuring of its home credit operations, coupled with an FCA investigation into historical sales of its repayment option plan product at Vanquis, Provident has today announced that the FCA is now investigating Moneybarn, it’s car finance business.
“As such, all three of the company’s main operating divisions are now under the spotlight for one reason or another.“
Mr Greenwood said that at this stage it is not clear whether there has been any wrongdoing, but for the FCA to be investigating then there must be at least some cause for concern.
“These factors, combined with current vacancies in the senior management team (both a permanent chairman and chief executive are being sought) following the recent tragic passing away of the company’s former executive chairman, Manjit Wolstenholme, mean that there is now simply too much uncertainty to justify us maintaining a positive stance on the shares,” he added.
Neil Wilson, senior market analyst at ETX Capital, said: “The FCA only authorised Moneybarn last June and it’s worth noting that this is by no means a large part of Provident’s overall business with only circa 50,000 customers out of the group’s two million-plus.
“But it adds to the woes for the embattled lender and is another headache for management at the worst time.
“Ultimately, with a healthy cash pile, new management and a turnaround strategy in place, Provident can weather regulatory storms such as these.
“The real question is whether it can get its core doorstep lending business back in shape. On that front the outlook is very uncertain.”