Job fears as Provident Financial is to exit the UK's oldest doorstep lending business

Credit lender Provident Financial is to withdraw from its doorstep lending business and will either run it down or dispose of it, placing thousands of jobs at risk.

Malcolm Le May, Provident's chief executive

The Bradford-based firm has begun a consultation process for the 2,100 employees employed in its home credit market and said the 141-year-old division will no longer offer any home collected credit.

Malcolm Le May Provident's chief executive, said: "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.

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"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."

Analyst Gary Greenwood at Shore Capital said: "Provident has confirmed recent speculation that it intends to close the loss-making consumer credit division (CCD) by way of a managed run-off or disposal at a pre-tax cost of up to £100m (this being around £35m lower than we had previously estimated as a potential worst-case scenario).

"While this will be incredibly disappointing news for employees and customers, we expect it to be welcomed by shareholders as it will lance a boil that has proven to be a source of significant financial pain in recent years.

A strategic review of the business by its new divisional managing director, Hamish Paton, concluded that the business is no longer viable due to a combination of a shrinking market, tighter regulation, elevated levels of customer complaints and high overheads.

Mr Greenwood said the cost of a managed run-off or trade sale of all, or parts, of the division is estimated by management at up to £100m, excluding an additional £65m of costs associated with the Scheme of Arrangement that have already been provided for.

He said the cost is likely to include a mixture of one-off redundancy costs and lease breaks as well as the operating costs of running down the business.

Mr Le May said the firm will build on its existing unsecured personal loan product expertise during the course of 2021, in the ‘mid-cost’ segment of the market.

He said the unsecured loan offering is an important step towards the group's plans to become a broader banking group to the financially underserved customer.

“2020 will be remembered as a tremendously difficult year for many people, including our customers," Mr Le May said.

"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."

Provident notified the market in March of its intention to launch a Scheme of Arrangement for its doorstep credit division.

Mr Le May said: 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."