Provident to shut down UK’s oldest home loan business
Provident Financial will close its home loan business in a move that highlights the pressures facing the subprime credit market, particularly the high levels of complaints from professional claims companies.
Provident, Britain’s largest subprime lender, has been providing home credit through an agent network for 141 years and has more than 380,000 customers, but the company has been in deficit since an attempt to modernize in 2017 turned bad and led to a pair of profits. warnings.
FTSE 250 also plans to shut down its online lending business, Satsuma, and instead focus on its Vanquis Bank credit card business and Moneybarn auto finance operation.
Shareholders were expected to be notified of the decision when Bradford-based Provident releases annual results on May 10, according to a person familiar with the plans. The closure was first reported in the Mail on Sunday. Provident Financial declined to comment when approached by the Financial Times.
Home loans involve a lender visiting the borrower’s home to collect repayments, often at high interest rates. Provident’s home loan business is the oldest in the country, but the company has struggled on several fronts for some time.
The company, along with other subprime lenders, has been accused of driving people into debt and failing to verify if they can afford to make repayments.
The volume of complaints was in part fueled by professional claims management companies that targeted the subprime credit market.
Provident warned in March that it could shut down some of its divisions, blaming the surge in submissions from claims handling groups that it said had made it impossible to continue to treat customer complaints as a normal operating cost.
The company spent £ 25million to compensate its customers in the second half of 2020, 10 times more than during the same period in 2019.
Also in March, Provident announced that it was under investigation by the city’s watchdog, the Financial Conduct Authority, into how it assessed the accessibility of its loans and how which she responded to a decision of the financial mediator last February.
Provident said the investigation would likely last until next year and added that “the appointment of investigators does not mean that the FCA has determined that any rule violations or any other contraventions have occurred.”
Many well-known short-term lenders, including Wonga and QuickQuid, have collapsed in recent years due to customer complaints.