Provident Financial to shut doorstep lending arm after 141 years as it crashes to loss
Troubled sub-prime lender Provident Financial today confirmed plans to shutter its doorstep lending arm as it reported a hefty loss for the full year.
The Bradford-based company said it was withdrawing from the home credit market after 141 years, adding that it has begun a consultation process for 2,100 employees.
“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 and we intend to either place the business into managed run-off or consider a disposal,” it said.
Provident Financial said it expected the cost of a managed run-off or sale to be up to £100m.
It came as the FTSE 250 company revealed it had swung to a £47.1m pre-tax loss in 2020, down from a £152.8m loss the previous year.
Provident said it would not pay out a full-year dividend as it looked to shore up its finances during the pandemic.
But it insisted it would resume the payout “as soon as operational and financial conditions normalise”.
Provident’s decision to shut its doorstep lending arm follows a difficult period for the division, which has failed to turn a profit in recent years and faced a growing number of complaints.
In March the Financial Conduct Authority opened a probe into the home credit unit, which it said would focus on “consideration of affordability and sustainability of lending to customers” between February 2020 and February 2021.
The company has launched a so-called scheme of arrangement to address the complaints, setting aside £50m to fund claims. It expects a further £15m in administrative costs.
There were more positive figures for Vanquis Bank — Provident’s credit card and personal loan division — which reported a pre-tax profit of £38m.
Its vehicle finance business Moneybarn also recorded a profit of £10.9m.
Provident has outlined plans to move away from high-cost products and focus instead on building its unsecured personal loans business.
“2020 will be remembered as a tremendously difficult year for many people, including our customers,” said chief executive Malcolm Le May.
“However, I and my executive management team are extremely proud of how everyone across PFG adapted quickly to the challenges brought by Covid-19.”