Credit, Collections & Insolvency News
Provident Financial has said that its doorstep lending unit will likely face insolvency if its £50 million settlement plan is not endorsed by a UK court.
The company says that its scheme of arrangement will entail higher-than-expected costs, and that it is taking measures to gain creditors’ approval so that consumer-credit-division companies aren’t required to start insolvency proceedings.
The company said the costs of the scheme are expected to total around £20 million, £5 million higher than previously estimated.
Provident’s scheme of arrangement–a court-approved compromise agreement between the company and its creditors–is linked to the disposal of its CCD arm earlier this year. Provident Financial is providing its customers new explanations on the closure of its CCD arm to encourage creditors to vote in favor of the scheme.
The company has also appointed a customer advocate to resolve customer queries and has obtained an independent valuation report into its CCD arm.
Early in the year Provident notified the market of its intention to launch a Scheme of Arrangement in response to the rising cost of consumer credit division (CCD) customer complaints based on historic lending. Provident has now updated the Scheme creditors, taking into account the judgement handed down in relation to the Amigo scheme.
Provident says that the consumer credit division was put into a managed run-off on 10th May 2021 and is going to plan. The company says that it has received one potential offer for CCD but this offer was only to wind up the division. Provident rejected the offer as it was less attractive financially than managing the run-off of the division itself. CCD has applied to rescind its permission to issue loans and the FCA has accepted this application, which means the credit divison can no longer issue loans. CCD is also continuing with its consultation process for colleagues. As CCD continues to collect out its loan book, colleagues will be leaving the division from July onwards, with the plan to close CCD by 2022.
Malcolm Le May, Chief Executive Officer, said “To help customers fully understand the Scheme, we have appointed a customer advocate to answer customer queries, obtained an independent valuation report into CCD, and are today providing customers with an update explaining the closure of CCD and strengthening the explanation of the Scheme. Since the Scheme was announced, CCD has been put into managed run-off, a process which is expected to conclude in 2022. As previously stated, if the Scheme is not approved by the creditors or the Court, the CCD companies are highly likely to commence insolvency proceedings, in which case customers will receive no redress payments. We therefore continue to believe that the Scheme is fair and in the best interests of CCD customers.”