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.
“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 to redress claims arising from customer credit-worthiness complaints.
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.
