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FCA probing Provident Financial consumer credit unit
15th Mar 2021 07:20
(Sharecast News) - Doorstep lender Provident Financial on Monday said the UK's financial regulator has started a probe into its consumer credit unit.
The company also said an internal review into the business "has made it clear" it needed to address the issue of rising customer complaints.
Britain's Financial Conduct Authority (FCA) is investigating focusing on the consideration of affordability and sustainability of lending to customers, as well as the application of a Financial Ombudsman Service (FOS) decision into the complaint handling process, in the period between February 2020 and February 2021.
Provident said the number of complaints to the FOS across the home credit market increased by 200% in the second half of 2020 compared with the first six months of the year. Provident paid out £25m to customers compared with £2.5m in 2019 and had processed balance reductions for home credit customers of £11m during the same period.
The group as a whole had performed "slightly" better than expectations in the fourth quarter and for the full year as a result, Provident said.
"When combined with the impact of Covid-19 on its profitability, customer complaints can no longer be treated as part of operating costs," the company said, adding that it had decided to pursue a scheme of arrangement "in order to address the issue of rising customer complaints as we work to position CCD for the future".
It would fund legitimate scheme claims with £50m and cover further scheme-related costs estimated at about £15m. If the scheme was not approved by the FCA, Provident said it was likely the division would be placed into administration or liquidation
"The appointment of investigators does not mean that the FCA has determined that rule breaches or any other contraventions have occurred," Provident Financial said.
"The FCA also continues to assess whether CCD is complying, and is likely to comply, with the standards it is expected to meet and the group's proposed approach to future lending as and when further details of such proposal are made available."
Provident said it held regulatory capital of £685m and the Group's common equity ratio stood at 35%. Headroom on committed facilities amounted to approximately £145m in addition to approximately £830m of liquid resource held by its Vanquis Bank unit.
The company also said an internal review into the business "has made it clear" it needed to address the issue of rising customer complaints.
Britain's Financial Conduct Authority (FCA) is investigating focusing on the consideration of affordability and sustainability of lending to customers, as well as the application of a Financial Ombudsman Service (FOS) decision into the complaint handling process, in the period between February 2020 and February 2021.
Provident said the number of complaints to the FOS across the home credit market increased by 200% in the second half of 2020 compared with the first six months of the year. Provident paid out £25m to customers compared with £2.5m in 2019 and had processed balance reductions for home credit customers of £11m during the same period.
The group as a whole had performed "slightly" better than expectations in the fourth quarter and for the full year as a result, Provident said.
"When combined with the impact of Covid-19 on its profitability, customer complaints can no longer be treated as part of operating costs," the company said, adding that it had decided to pursue a scheme of arrangement "in order to address the issue of rising customer complaints as we work to position CCD for the future".
It would fund legitimate scheme claims with £50m and cover further scheme-related costs estimated at about £15m. If the scheme was not approved by the FCA, Provident said it was likely the division would be placed into administration or liquidation
"The appointment of investigators does not mean that the FCA has determined that rule breaches or any other contraventions have occurred," Provident Financial said.
"The FCA also continues to assess whether CCD is complying, and is likely to comply, with the standards it is expected to meet and the group's proposed approach to future lending as and when further details of such proposal are made available."
Provident said it held regulatory capital of £685m and the Group's common equity ratio stood at 35%. Headroom on committed facilities amounted to approximately £145m in addition to approximately £830m of liquid resource held by its Vanquis Bank unit.