Compensation plan for Provident customers is backed by High Court

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The High Court has backed a partial repayment scheme for customers of doorstep lender Provident Financial who want to claim compensation for mis-sold loans.

The Bradford-based company has put aside £50m to meet claims from borrowers who were sold unaffordable loans by its Consumer Credit Division (CCD).

But customers will still not get all their money back. The Court agreed to the scheme after Provident warned full payments would mean it would go bust leaving many victims with nothing.

Malcolm Le May, chief executive of Provident, said: “The Court has approved the sanctioning of CCD’s scheme, which is a positive outcome for CCD’s customers with valid claims under the scheme, as it provides access to a redress payment which would not have been possible had the scheme not been approved.

Malcolm Le May

“We believed from the outset that the scheme was fair and that it offered the best outcomes for customers.

“The Court sanction enables us to move forward with the scheme and we expect creditors will receive redress payments in the second half of 2022.

“As we have stated previously, the managed run-off of the CCD business is progressing well and we will provide the market with a further update as to how the Group is positioned for the remainder of 2021 and beyond with our interim results on 11 August 2021.”

The scheme is for customers who had unaffordable loans between 6 April 2007 and 17 December 2020 from one of Provident’s personal credit brands.

They are doorstep lender Provident, Satsuma payday loans, Greenwood – a doorstep lender defunct since 2014 – and Glo, a guarantor loan brand.

The Financial Conduct Authority (FCA) had launched an investigation into the consideration of affordability and sustainability of lending to Provident’s CCD customers.

Provident withdrew from the doorstep lending business earlier this year, blaming “changing industry and regulatory dynamics” as well as “shifting customer preferences”.

In May it confirmed it was closing down its loss-making 141-year-old CCD division, which employed more than 2,000 people.

Provident said it could not afford to carry on paying full refunds to customers who were winning affordability complaints, which led to the High Court approved scheme.

The FCA said it did not approve of the scheme but as Provident has stopped providing doorstep loans, it did not challenge it in court.