Doorstep lender Provident Financial said the UK’s financial watchdog Financial Conduct Authority (FCA) is investigating the firm in its consumer credit unit.
The FCA will be investigating the consideration of affordability and sustainability of lending to customers, as well as the application of a Financial Ombudsman Service (FOS) decision into the complaint handling process for the period between February 2020 and February 2021.
Provident said that it was aware of the need to address “rising customer complaint volumes” across the division which was up by 200% in the second half of 2020 compared with the first six months of the year.
“When combined with the impact of Covid-19 on its profitability, customer complaints can no longer be treated as part of operating costs,” the company said.
As a result, it has come up with a scheme of arrangement to redress claims arising from customer credit-worthiness complaints which if approved, would “bring certainty for stakeholders and ensure that customers with a legitimate claim get fair access to redress payments,” the firm said.
It would fund legitimate scheme claims with £50m and cover further scheme-related costs estimated at about £15m. If the scheme was not approved by the FCA, the division would be likely to be placed into administration.
“The appointment of investigators does not mean that the FCA has determined that rule breaches or any other contraventions have occurred,” Provident Financial said.
“The FCA also continues to assess whether CCD is complying, and is likely to comply, with the standards it is expected to meet and the group’s proposed approach to future lending as and when further details of such proposal are made available.”
Provident Financial shares were down 18% early Monday following the announcement.
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