Provident in a sweat amid payout fears

PROVIDENT Financial will place its sub-prime lending business in administration if the High Court does not approve its plans to cap compensation payouts to people that were mis-sold loans on Thursday.

The lender said that it will compensate those that were mis-sold unaffordable loans by its brands Glo, Satsuma and Greenwood, between April 2007 and December 17, 2020. It is believed to have up to 379,000 sub-prime borrowers.

Provident has set aside £50million to fund payments to what it deems to be “legitimate” claims and will spend £15million on administering the compensation scheme. Payouts would likely be around 10 per cent of the amounts owed to people.

If the High Court rules that the scheme is fair, it will be put to a creditors’ vote in July. If it does not,

Provident will place its doorstep lending business into administration and victims would get nothing.

Provident is confident that the High Court will give the scheme its backing, based on the fact that it did so for fellow sub-prime lender,amigo.

Additionally, despite their misgivings about Amigo’s compensation scheme, neither the Financial Conduct Authority nor the Financial Ombudsman Service raised concerns with the High Court.

The lender says that if creditors approve of the scheme in July, customers will have six months to submit claims for compensation.

The cut-off for filing claims is January and Provident hopes to have finished making payouts during the first half of next year.