Provident Financial is to shut its doorstep lending business in a move that highlights the pressures facing the subprime credit market, particularly high levels of complaints by professional claims companies.
Provident, Britain’s largest specialist subprime lender, has provided doorstep credit through a network of agents for 141 years and has more than 380,000 customers, but the business has been lossmaking since an attempt to modernise it in 2017 went wrong and led to a pair of profit warnings.
The FTSE 250 company is also planning to close its online lending business, Satsuma, and instead focus on its credit card business Vanquis Bank and its car finance operation Moneybarn.
Shareholders were due to be told about the decision when Bradford-based Provident publishes annual results on May 10, according to one person with knowledge of the plans. The closure was first reported in the Mail on Sunday. Provident Financial declined to comment when approached by the Financial Times.
Doorstep loans involve a lender visiting the borrower’s home to collect repayments, often at high rates of interest. Provident’s doorstep lending business is the oldest in the country but the company has faced difficulties on several fronts for some time.
The company, along with other subprime lenders, has faced accusations of leading people into debt and failing to check whether they can afford to make repayments.
The volume of complaints has been driven in part by professional claims management companies that have targeted the subprime credit market.
Provident warned in March that it might close some of its divisions, blaming the surge in submissions by claims management groups that it said had made it impossible to continue treating customer complaints as a normal operating cost.
The company spent £25m compensating customers in the second half of 2020, 10 times more than in the same period in 2019.
Also in March, Provident announced it was under investigation by the city watchdog, the Financial Conduct Authority, over the way the it had assessed the affordability of its loans, and the way it responded to a ruling by the Financial Ombudsman last February.
Provident said the investigation was likely to last until next year and added that “the appointment of investigators does not mean that the FCA has determined that rule breaches or any other contraventions have occurred”.
Many well-known short-term lenders, including Wonga and QuickQuid, have collapsed in recent years due to customer complaints.