Financial Services

UK watchdog investigates Provident’s Moneybarn unit

Vehicle financing arm of lender, which also operates in Ireland, under investigation

Provident said the Financial Conduct Authority had already discussed certain processes with Moneybarn which had led to a number of “process improvements”.

Tue Dec 5 2017 - 09:04

British lender Provident Financial said the country's financial watchdog had opened an investigation into Moneybarn, its car and van financing arm. The Financial Conduct Authority (FCA) investigation will examine the "processes applied to customer affordability assessments for vehicle finance and the treatment of customers in financial difficulties", Provident said.

Provident also operates in Ireland, where it is the largest moneylender, offering loans from €100 at rates of 187.2 per cent.

The British subprime lender has run into trouble after trying to reorganise its door-to-door lending business by ending its model of using self-employed agents as debt collectors and replacing them with directly employed staff.

Against a backdrop of broader public and political criticism of the high-interest lending sector, Provident is already contending with lost income resulting from an FCA investigation into its Vanquis Bank.

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Provident said on Tuesday that the FCA had already discussed certain processes with Moneybarn which had led to a number of “process improvements”. The lender said it would work with the FCA to investigate the remaining concerns and fix any outstanding related issues “as soon as practicable”.

“While this may well be resolved without harm to Moneybarn’s business, it adds another overhang to the stock. In our forecasts for 2018, Moneybarn accounted for £40.2 million of a total group underlying pretax profit of about £164 million,” Jefferies analysts said.

Banks’ reluctance to lend since the financial crisis has made more Britons look to lenders charging high interest rates such as Provident. About £1.5 million people are borrowing in this way, taking more than £1.1 billion of credit.

Provident Financial’s brands include Vanquis Bank, consumer credit division Provident, Moneybarn, and Satsuma, which gives online, short-term loans. – Reuters

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