FCA won’t block doorstep lender’s compensation plan
PROVIDENT Financial is set to cap the compensation for the thousands who were mis-sold sub-prime loans at just 10 per cent, after the City watchdog decided against opposing the plan.
The Financial Conduct Authority said it had “serious concerns” about the £50million compensation, especially as victims will get “significantly less” than the value of their claims and it believes Provident can afford to pay more.
But, despite that, the regulator is dropping its opposition because Provident has said it would put its doorstep lending business or consumer credit division (CCD) into administration. Were that to happen, those that were mis-sold loans would get nothing.
Provident is closing the business, which will result in the loss of 2,100 jobs, as it wants to focus on unsecured lending.
Given that, the FCA says that the company and its shareholders will not be unfairly benefitting at the expense of victims. The FCA had objected to a similar scheme put forward by Amigo Loans to the High Court, which has left the lender on the verge of collapse. Provident chief executive Malcolm Le May said: “Although the FCA has confirmed it does not support the scheme and has summarised a number of concerns, I am pleased that it has decided not to appear in court to oppose the sanction of the scheme.
“We continue to believe that it is fair and in the best interests of CCD customers.
“We are committed to delivering the scheme successfully and the FCA deciding to not oppose the sanction of it in court takes us one step closer to being able to do just that.”
Provident creditors will vote on the compensation on Monday and if they back it, the High Court will be asked to approve it on July 30.
Compensation will be paid to those that were mis-sold unaffordable loans by Provident’s Glo, Satsuma and Greenwood brands between April 2007 and December 17, 2020.