Now Provident Financial is facing a £300m bill in a PPI-style mis-selling scandal

Oliver Gill
Follow Oliver
F1 Live In London Takes Over Trafalgar Square - Car Parade
Provident Financial will be relegated from the FTSE 100 at the end of trading on Friday (Source: Getty)

Stricken doorstep lender Provident Financial is facing a £300m bill to clear up the fall out of a regulatory probe into the mis-selling of a PPI-style product.

Subsidiary Vanquis Bank is currently being investigated by the Financial Conduct Authority (FCA) over the sale of a product called a "Repayment Option Plan" (ROP).

The probe was announced last month as part of a shopping list of problems that led to one of the biggest ever sell-offs of a FTSE 100 firm.

And in a gloomy note issued by Royal Bank of Canada this morning, analysts said customer redress, penalties and the cost of administering the situation is likely to cost Provident £300m.

Read more: Provident's former boss Peter Crook surrenders a year of pay and bonuses

ROP is an add-on to Vanquis accounts which freezes debts owed if you experience "certain life events". It differs to PPI, which repays capital and interest on debts. Regulators see PPI as an insurance product whereas ROP is not.

Shares in Provident, which will be relegated out of the FTSE 100 at the end of trading on Friday, tumbled almost five per cent in early trades and are currently 3.5 per cent lower at around 810p each.

In a note, entitled "Much ado about something", RBC said Provident's stock is worth 775p.

However, RBC added, the Bradford-based lender was not facing a burning platform in cash terms as it is sitting on £250m of reddies. Its next major pinch point will be a £250m bond repayment scheduled for October 2019.

Provident Financial declined to comment.

Read more: Provident Financial has just handed rival Morses a whopping profits boost

Related articles