Sub prime lender prepares to shut crisis hit division

Provident Financial is preparing to shut its doorstep lending business which has been running for 141 years, and online platform Satsuma as it looks to focus on its credit card brand Vanquis Bank and car finance operation Moneybarn.

The move comes after a turbulent year for the UK’s largest sub prime lender, which has seen the Bradford-based firm launch a review of its consumer credit division (CCD) following large volumes of customer complaints and an FCA enforcement investigation into CCD relating to a decision by the Financial Ombudsman Service last February into the complaint handling process and how the division has applied it in the year since.

According to media reports over the weekend, a source with knowledge of the firms plans states the FTSE 250 company was planning to inform shareholders when it publishes its annual report next Monday (10 May).

Provident Financial’s doorstop business which was the foundation for the firms lending currently has more than 380,000 customers and closing it would be the latest hit to the sub prime market which has seen competitors such as Wonga and QuickQuid close in recent years.

The shutting of the loss making division was first mentioned in March when the firm warned it was “likely” the division would be put into administration or liquidation if it couldn’t agree a scheme of arrangement for assessing and paying compensation claims relating to the firms Provident, Glo and Satsuma products.

At the time of the reports Provident declined to comment but today has stated: “The Group confirms that, whilst no decisions have been made, the review is nearing completion and the outcome will be announced with the Group’s full year 2020 results, to be published on Monday 10 May.”

The business has currently put £65m aside to deal with compensation claims from CCD customers.

The saga of the firm’s CCD dates back to 2017, when a profit warning within the division was central to the then-FTSE 100 company seeing two-thirds of its market value lost in a day as its share price crashed.

Although the group eventually survived that crisis – and staved off a hostile takeover bid – its share price today is more than 90% lower than it was four years ago.

Sources expect the process for closing the CCD to follow a “collect out” plan with the business slowly winding down operations as it seeks to secure as much money back from its loans as possible. The firm has already stopped lending to new customers through its Satsuma product and tightened the criteria for its doorstep business.