Provident Financial 'set to close doorstep lending' after…

Provident Financial 'set to close doorstep lending' after over 140 years

BRADFORD-based Provident Financial is set to shut its doorstep lending business after more than 140 years, it has been reported.

The city-centre based institution has more than 380,000 customers and is Britain’s largest specialist sub-prime lender.

However it has been loss-making since an attempt to modernise went awry four years ago, leading to profit warnings.

The move by Provident highlights the pressure on the sub-prime credit market, and follows the collapse of other well known short-term lenders such as Wonga and QuickQuid in recent years following customer complaints.

It was reported in national newspapers that Provident will also close its online lending business Satsuma, switching focus to its credit card business Vanquis Bank, and car finance operation Moneybarn.

It was reported shareholders were due to be told about the decision when Provident publishes its annual results next week.

The closure was first reported in the Mail on Sunday, and Provident declined to comment when approached by the national press.

Doorstep loans involve lenders visiting the home of a borrower to collect repayments, often with high levels of interest.

Provident’s doorstep lending business is the oldest in the country, but the sub-prime lending industry has been a sector under fire from complaints for some time.

The industry has faced accusations of leading people into debt and failing to check whether people can afford to make repayments, with a alrge volume of complaints made against sub-prime lenders made by professional claims management companies.

The Godwin Street-based lender, warned in March it might close some of its divisions, blaming the surge in submissions by claims management groups.

It said these claims had made it impossible to continue treating customer complaints as a normal operating cost.

In the second half of 2020, it spent £25 million compensating customers, ten times more than it spent during the same period in 2019.

Provident was founded in Bradford in 1880 to provide affordable lending to working class families in West Yorkshire, and was listed on the London Stock Exchange in the 1960s.

In 2002 it formed Vanquis Bank, specialising in pre-paid credit cards, and in 2013 it formed Satsuma Loans to offer short-term loans online before acquiring Moneybarn a year later.

In August 2017, a second profit warning in two months, its chief executive being replaced by Manjit Wolstenholme, a cancellation of shareholder dividend and a warning the full year dividend may be cancelled, and an investigation by the Financial Conduct Authority getting underway, all saw it’s share price plummet from £32 to £8.50 in the space of six months.

The price has since rebounded and sits at £245.

An investigation by the FCA began in March over the way it assessed the affordability of its loans and how it responded to a ruling by the Financial Ombudsman last year, and the investigation is likely to last until 2022, but that “the appointment of investigators does not mean that the FCA has determined that rule breaches or any other contraventions have occurred”.