Lender shutting crisis hit doorstep lending division
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Bradford-based Provident Financial (PFG) has this morning confirmed it is closing down its loss-making 141-year-old doorstep lending business, which employs more than 2,000 people.
The news comes as the Group releases its preliminary results for the year ended 31 December 2020, which feature a pre-tax loss of £113.5m (2019: pre-tax profit of £119m). Adjusted loss before tax was £47.1m (2019: adjusted pre-tax profit of £152.8m) and says it aims to “become a broader banking group for the the financially underserved customer”.
Malcolm Le May, Chief Executive Officer, said: “In light of the changing industry and regulatory dynamics in the home credit sector, as well as shifting customer preferences, it is with deepest regret that we have decided to withdraw from the home credit market.
“We intend to either place the business into managed run-off or consider a disposal.
“As a result, PFG will no longer offer any ‘high-cost’ products and we will not be issuing any high-cost or home collected credit products from any CCD entity in future.
“We intend to build upon our existing unsecured personal loan product expertise during the course of 2021, in the ‘mid-cost’ segment of the market, an ambition that stretches back to our Capital Markets Day in 2019.
“The unsecured loan offering is an important step towards our plans of becoming a broader banking group to the financially underserved customer.”
Provident has said it will now focus on its credit card brand Vanquis Bank and car finance operation Moneybarn.
In today’s results, Moneybarn reported adjusted pre-tax profits of £10.9m (2019: £21.1m) and Vanquis Bank adjusted pre-tax profits of £38m (2019: £173.5m).
Provident had previously launched a review of its consumer credit division (CCD).
This followed 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.
The shutting of the 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 end of March 2021, CCD had approximately 2,100 employees and an internal consultation for these employees has started today.
It is anticipated that the cost to the Group of placing the business into managed run-off or disposing of the division will be around £100m.
Commenting on the latest results, Le May added: “2020 will be remembered as a tremendously difficult year for many people, including our customers.
“However, I and my executive management team are extremely proud of how everyone across PFG adapted quickly to the challenges brought by Covid-19.
“Importantly, our customers continued to receive the vital support they needed, despite lockdown restrictions.
“Whilst the Group is reporting an adjusted loss before tax of £47.1m for 2020, I am pleased to say Vanquis Bank and Moneybarn remained profitable for 2020 as a whole and have started 2021 positively.”
Looking ahead the chief executive added that the business expects Covid-19 to “increase the size of our addressable markets” as a result of the pandemics impact on household finances, particularly as Government support schemes end.
He added: “As a result of our balance sheet strength and proactive but prudent approach to risk management, the group remains well positioned”. Noting that it will continue to expand its “digital footprint, invest in new products and focus on funding efficiencies to become a broader banking group for the the financially underserved customer.”