Provident Financial (PFG) has confirmed that it is closing down its loss-making 141-year-old doorstep lending business. The division employs more than 2,000 people.
The news comes as the Group releases its preliminary results for the year ended 31st December 2020, which feature a pre-tax loss of £113.5 million (2019: pre-tax profit of £119 million). The adjusted loss before tax was £47.1 million (2019: adjusted pre-tax profit of £152.8 million).
The car finance brand, Moneybarn, reported adjusted pre-tax profits of £10.9 million and Vanquis Bank adjusted pre-tax profits of £38 million.
The company’s payday lending, Satsuma which began operating in 2013 and had recently stopped lending to new customers.
Malcolm Le May, Chief Executive Officer, said “2020 will be remembered as a tremendously difficult year for many people, including our customers. However, I and my executive management team are extremely proud of how everyone across PFG adapted quickly to the challenges brought by Covid-19. Importantly, our customers continued to receive the vital support they needed, despite lockdown restrictions. 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.”
Commenting on the news Jason Wassell, Chief Executive of the CCTA said “This news is shocking and yet not a surprise to those watching alternative lending. We have long been concerned that the current regulatory framework does not work for the market, or its customers. The result in this case is that access to credit will be reduced for hundreds of thousands of people.
“These are individuals and communities that have been left behind by banks and mainstream lenders. They access the non-standard market for reasons such as major life events, variable income, or a lack of credit history. They are often seeking small amounts to manage their finances in a flexible way.”
“The constantly changing approach by the FOS, along with the increasing claims culture being driven by Claims Management Companies, is making it difficult for firms to operate and attract investment. These factors together led to major market exit in the high-cost short-term credit sector, and it has now spread to home credit.
“Market exit is likely to continue across the sector if these problems are not addressed. The outcome will be that access to credit is reduced for a group of consumers who will struggle to borrow elsewhere.”