Doorstep lender’s bid to cap compensation on mis-selling
PROVIDENT Financial has warned its doorstep lending arm could collapse if customers reject a cap on payouts.
Complaints have surged about its Consumer Credit Division (CCD) from people who say they were mis-sold loans which they could not afford to repay.
Provident blames claims management firms for fuelling the rise.
However, regulator the Financial Conduct Authority is probing the division’s “consideration of affordability”.
Provident paid back £25million to customers in the second half of last year – 10 times the same period in 2019.
With complaints still coming in, it announced proposals yesterday to place a £50million limit on future payouts.
However, the move needs to be approved by customers who have made a complaint but have yet to get redress.
If rejected, Provident warned the division “will be placed into administration or liquidation”.
It added: “If this were to happen, CCD customers would not be expected to receive any redress payment.”
Provident’s history dates back to 1880 when it was founded in Bradford to help struggling families pay for essentials such as furniture, clothes and shoes.
Known by some as the Provy, it built a network of agents making loans and collecting payments door-to-door. It listed on the London Stock Exchange in 1962.
Nowadays, around 90 per cent of Provident’s clients are in its two other divisions, Vanquis and Moneybarn.
However, the doorstep lending arm still had 379,000 customers at the last count.
The update is a big setback for the firm, which was plunged into a crisis in 2017 when it undertook a botched overhaul of its home-credit business by replacing its army of selfemployed doorstep collection agents with direct employees. Provident has been working towards repairing its brand, and in 2019 fended off a hostile bid from smaller rival NonStandard Finance.
Provident’s Moneybarn unit was fined last year by the FCA over unfair treatment of customers following a separate investigation.
Shares in the company fell sharply yesterday.