Bradford-based subprime lender Provident Financial plc (PFG) confirmed on Monday it will close its Consumer Credit Division (CCD) — a 141-year-old doorstep lending business.
The confirmation came as Provident Financial announced a pre-tax loss of £113.5 million for 2020, compared with a £119 million profit the previous year, reflecting “a significant decline in receivables as a result of Covid-19.”
Provident Financial said: “As a result of the operational review concluding, and in response to evolving market and customer dynamics, the group has decided to withdraw from the home credit market entirely.
“The group intends to either place the business into a managed run-off or consider a disposal.
“It is anticipated that the cost to the group of placing it into managed run-off or disposing of CCD will be up to c.£100m.
“CCD has also begun a collective consultation process for c.2,100 colleagues regarding its plans to withdraw from the home credit market.”
Provident Financial CEO Malcolm Le May said: “Whilst the group is reporting an adjusted loss before tax of £47.1m for 2020, I am pleased to say that Vanquis Bank and Moneybarn remained profitable for 2020 as a whole and have started 2021 positively.
“We notified the market in March 2021 of our intention to launch a Scheme of Arrangement for CCD.
“I am pleased to report that the Court has granted the opportunity for the Scheme creditors to meet and assess the Scheme on its own merits.
“We firmly believe that the Scheme is the fairest compromise we can offer for CCD customers, past and present.
“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.
“It is anticipated that the cost to the group of a managed run-off or a sale would be broadly similar.
“As a result, PFG 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.
“We intend to build upon our existing unsecured personal loan product expertise during the course of 2021, in the ‘mid-cost’ segment of the market, an ambition that stretches back to our Capital Markets Day in 2019.
“The unsecured loan offering is an important step towards our plans of becoming a broader banking group to the financially underserved customer.
“Our credit card and vehicle finance businesses saw improving trends during the first quarter of 2021, with credit card spend improving and the demand for vehicle finance increasing month on month.
“These positive trends, supported by the group’s strong balance sheet, mean that we feel confident about how we are positioned in our markets.”