Bid reveals loan rip-offs
THE knockabout bid battle for doorstep lender Provident Financial is great City drama. It has also shone a light on a corner of the financial market that does not usually figure highly in the Square Mile: lending to badly-off customers who are charged exorbitant rates of interest on their loans.
This bid is proving to be a catalyst for the watchdogs to take a harder look at a market that is used by 10m Britons, which is an entirely good thing.
The takeover fight boils down to a choice between the current management under Malcolm Le May and former chief executive John van Kuffeler, who is itching to take back the helm.
The latter believes he has already won the day – having secured the backing of large investors – but the regulators are not going to roll over that easily. The prospectus this weekend made clear one risk is that the watchdogs will clamp down on products and sales practices.
This is a fight between two highly privileged men over a firm that lends to some of the poorest in the country. John Van Kuffeler is a scion of the Flemish aristocracy and Le May is a former investment banker.
Fortunately, the Financial Conduct Authority is taking a tough line. It has written to Kuffeler warning him that it will take action if he tries to squeeze out more profit at the expense of customers. Interest rates on Provident products are steep, with APRs in the hundreds or thousands of percent.
The firm has in the past few years also been in trouble with regulators for mistreating customers. It has already agreed to pay compensation to borrowers who were missold products giving them a payment holiday on their credit cards if they ran into temporary financial problems, and may give an update this week on a probe into its Moneybarn car finance arm.
AFTER delaying for a fortnight because of the hostile bid by Kuffeler’s new business, Non-Standard Finance, Provvy will this week also reveal its profits for 2018.
Performance at the firm has been dire for some time. Kuffeler’s case is that under his 22-year reign, before he retired in 2013, it did well – and that he should therefore return in the role of saviour.
After Kuffeler left, Provvy fell into disrepute under former chief executive Peter Crook, who was stupendously overpaid, taking home £40m over ten years. Le May took the reins after Crook was ousted and the previous chairman tragically died. He has been valiantly trying to steady the ship but there is no getting away from the fact he is an accidental CEO.
In Kuffeler’s favour is the fact he does have an impressive track record. Over his time at the Provvy, the share price rose from around 70p to £12. It is now just under £6.
Comebacks can work spectacularly well – Steve Jobs’ return to Apple is the classic example. But the question is: does Kuffeler’s success in the past, in a very different regulatory landscape, mean he is the best man to lead the company now? There may well be better people than either him or Le May out there and the letter from the FCA was a real warning bell.
If nothing else, the imbroglio has drawn attention to the enormous charges imposed on badly off borrowers. Whoever ends up running Provvy, they need to treat customers better.