Provident Financial axes doorstep lending after 141 years putting 2,100 jobs at risk
Provident Financial is closing its 141-year-old doorstep lending business – putting 2,100 jobs at risk.
The firm, which specialises in loans for people who are deemed too risky by normal banks, blamed ‘changing industry and regulatory dynamics’ for the poor performance of its home credit division in recent months.
In a huge departure from its roots, Provvy will try to sell the business or wind it down, meaning the lender will no longer offer any high-cost or home-collected loans.
End of an era: Doorstep Provident Financial blamed ‘changing industry and regulatory dynamics’ for the poor performance of its home credit division in recent months
Instead, it will focus on ‘mid-cost’ products such as credit cards and unsecured personal loans through its Vanquis Bank brand, motor finance through its Moneybarn arm and payday lending through its Satsuma business.
Provvy’s doorstep lending division, which dates back to 1880, has been dogged by rising customer complaints and an investigation by the Financial Conduct Authority (FCA).
Professional claims management companies have increasingly targeted sub-prime lenders like Provvy, many of whom rely on doing business with the same customers again and again, after the regulator decided to clamp down on repeat lending.
Provvy – whose woes had been amplified by a botched restructuring in 2017, when it tried to convert its army of self-employed agents into full-time staff – has now had to set up a £50million compensation fund to deal with the complaints.
While its decision to ditch doorstep lending will be welcomed by campaigners who want to put a stop to expensive debt, there are worries that Provvy’s departure could drive cash-strapped borrowers into the arms of loan sharks.
Justin Modray, of Candid Financial Advice, said: ‘Whilst Provident Financial and other regulated doorstep lenders might come under fire for the high interest they charge, it is probably preferable to old-school local lenders who are unlikely to be sympathetic when a loan cannot be repaid.
Provident’s chief executive Malcolm Le May (pictured) said the company was ‘confident’ in the outlook for 2021
In an ideal world everyone would get a grip on their finances and avoid borrowing in this way, but in reality there is demand for doorstep borrowing and better it’s via FCA-regulated businesses than not.’
Provident, founded by insurance agent Sir Joshua Waddilove when he saw how hard it was for working-class families to buy home essentials, also believed its local agents’ expertise and relationships provided better results for borrowers than going to a faceless bank.
Jason Wassell, chief executive of the Consumer Credit Trade Association, which represents alternative and high-cost lenders, said: ‘Access to credit will be reduced for hundreds of thousands of people.’
Provvy’s announcement came as it unveiled its results for 2020, swinging to a loss of £113.5million from a profit of £119million a year earlier.
But although Provvy had to scale back its new lending during the pandemic last year, as it waited to see how the economy would recover, chief executive Malcolm Le May said the company was ‘confident’ in the outlook for 2021.
Le May added that the pandemic could bring in more business for Provident in the long run, as people lose their jobs or have to take pay cuts and turn to lenders to make ends meet.