John van Kuffeler plans to raise £100m to launch Non-Standard Finance (NSF), a shell business which will buy a series of consumer loan firms and merge them into a larger player.
Woodford Investment Management, Invesco Asset Management Limited and Marathon Asset Management have contributed £48m, leaving NSF to raise the remainder in a stock market listing.
NSF will target the unsecured consumer lending sector, as well as guaranteed loans and the rent to own market.
Van Kuffeler is joined by former Marlin Financial Group CFO Nick Teunon, Duke Street partner Miles Cresswell-Turner, ICAP chairman Charles Gregson, Leeds Building Society chairman Robin Ashton and Taylor Bennett boss Heather McGregor.
“We are looking for businesses which are doing well, but don’t have the capital. They tend to be owner-managed, with capital limited to that from the proprietor,” Van Kuffeler told City A.M. “They have good products, but don’t have the depth of management and depth of experience, they don’t have further product knowledge outside the sector, or the ability to deal with the Financial Conduct Authority (FCA).”
The FCA only took over regulating the consumer finance sector last year, and it expects a large number of firms to leave the market.
NSF does not plan to get involved in the payday lending sector, but expects there will be plenty of room elsewhere in the market to grow.
“This is an opportunity, a golden moment,” Van Kuffeler said.
“There are likely to be a number of companies for sale, and we have all the things they are lacking.”
A UBS team led by Stephen Paine and Christopher Smith is the sole bookrunner on the float.
PROFILE: JOHN VAN KUFFELER
CONSUMER finance has a bad reputation, and Non-Standard Finance’s (NSF) chairman John van Kuffeler says he can help solve that.
Even the better end of the market has traditionally been seen as the domain of small scale operators with variable management quality, while, in the public’s imagination, the bottom end is seen as the unethical territory of borderline crooks.
Concerns over customer treatment led the Financial Conduct Authority to get involved in the sector, questioning firms’ debt collection practices, and forcing lenders to do more to make sure borrowers can afford their loans.
Van Kuffeler told City A.M. he is on a mission to change that reputation, aiming to create a large-scale firm which treats customers fairly and meets a need banks cannot fulfill.
The chairman said he has already helped improve the sector through his previous work heading up Provident Financial.
“Sending in the muscle is illegal, it is straightforward criminal activity, and no firm licensed by the FCA ever did that,” he said.
“At Provident we saw that when we expanded into some areas, the police would tell us that criminal activity disappeared at the same time. It is a very positive for these income groups.”
He wants NSF to establish high quality debt collection practices, promising to work with any struggling customers to put together repayment plans which match their disposable incomes.
“It is a hallmark of my career that if there is a problem, we want to understand it. We can help the customer by going through their income carefully, looking at what it is possible to repay while leaving them some money to spare,” he said.
“If we take smaller repayments over long period, they repay the loan and are also still creditworthy and can take smaller loans in future.”
And Van Kuffeler is keen to dispel the idea that consumer finance loans exploit the poor.
“We can enormously improve the reputation of the industry as we grow.”
That is not to say he does not intend to make healthy profits from the venture. The market notice tells investors NSF hopes to make a 20 to 30 per cent return on equity, with a strong flow of dividends.