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Provident Financial is to close its doorstep lending business, 141 years after it was first started, in a move that will put 2,100 jobs at risk.
The sub-prime lender will seek to either sell or wind down its consumer credit arm. The cost of either course of action to the company will be as high as £100m, Provident said.
The doorstep lending arm – which offered high-cost loans to people with weak credit histories – had been struggling even before the coronavirus pandemic, losing £21m in 2019. However, those losses expanded dramatically during 2020 to £75m, according to financial results also published on Monday.
The division has started consultations with its 2,100 workers over their future.
Provident has faced a wave of mis-selling complaints by customers, in part driven by claims management companies, which were looking for a new target after the final deadline for claims in the payment protection insurance mis-selling scandal.
In March, the lender wrote to customers warning that its consumer credit division could collapse into administration because of the deluge of compensation claims.
The doorstep lender also revealed it was facing a regulatory investigation by the Financial Conduct Authority into a number of issues, including whether it carried out proper affordability checks before lending to borrowers.
The original doorstep lending business was first started in 1880 by Joshua Waddilove, an insurance agent who came up with a scheme for poorer residents of Bradford, West Yorkshire, to pay for clothing using vouchers that were then paid back in instalments.
Provident lost £114m overall during the year, after making profits of £119m in 2019. It attributed the loss to the slump in loans during the pandemic but said it had seen recovering activity in credit card spending and vehicle leasing in the first quarter of 2021.
Malcolm Le May, Provident’s chief executive, said: “In light of the changing industry and regulatory dynamics in the home credit sector, as well as shifting customer preferences, it is with deepest regret that we have decided to withdraw from the home credit market and we intend to either place the business into managed runoff or consider a disposal.”
The decision means Provident will not offer any products that qualify as “high-cost” for regulatory purposes, Le May said. However, it will still focus on offering finance such as credit cards and unsecured loans to poorer borrowers who are classed as “sub- or near-prime” under the Vanquis Bank brand. Vanquis and its car finance brand, Moneybarn, were profitable during 2020, the company said.