Subprime credit firm Provident Financial is to axe its doorstep lending arm putting 2,100 jobs at risk, blaming “changing industry and regulatory” dynamics.
The lender has faced growing customer complaints and an investigation by the City regulator, and earlier this year offered to set up a £50m fund to try to resolve compensation claims.
It has also been criticised by MPs over its approach to financially vulnerable customers.
Provident Financial reported an annual loss of £113.5m
Provident has been trying to turn around the fortunes of its doorstep lending division, which dates back to 1880, since a botched restructuring in 2017 when it tried to convert its army of self-employed agents into full-time staff.
The group describes itself as the “leading provider of credit products to consumers who are underserved by mainstream lenders”.
It includes credit card lender Vanquis and car finance provider Moneybarn, as well as its consumer credit division (CCD) which covers the Provident “home credit” arm and the Satsuma payday lender brand.
Chief executive Malcolm Le May 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 run-off or consider a disposal.
“As a result, PFG [Provident Financial group] will no longer offer any ‘high-cost’ products and we will not be issuing any high-cost or home collected credit products from any CCD entity in future.
“At the end of March 2021, CCD had approximately 2,100 employees and an internal consultation for these employees has started today.”
Moneybarn is Provident’s car finance arm
The announcement came as Provident Financial reported a loss of £113.5m for 2020, described by Mr Le May as a “tremendously difficult year”, compared to a profit of £119m a year earlier.
Underlying losses at the doomed consumer credit arm ballooned from £20.8m to £74.9m.
Customer numbers slumped by 40% to 311,000. A decline in new loans being issued was blamed on tighter lending regulations as well as coronavirus restrictions.
Provident’s credit card and car finance businesses also had a tough time, with profits falling, but Mr Le May said they had seen “improving trends” at the start of this year as lockdown restrictions ease.
The group also expects to benefit from an increase in the number of adults with “low financial resilience” who will struggle to access loans from mainstream banks.