On 10 May 2021, Provident Financial Group (PFG) announced that it was closing its home credit operation, also known as doorstep lending.
Doorstep lending has been at the heart of Provident’s business for most of its 140-year history. Agents would visit customers at home, giving loans and collecting weekly repayments.
Now Provident says:
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 …
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.
In March 2020 Provident proposed a Scheme to cap refunds to customers making affordability complaints.
I have looked at the background to the Scheme here.
provident says the Scheme could give people about 10% of their “full refund”, but looking at the numbers I think this may be less than 2%.
The Financial Conduct Authority (FCA) has said:
the FCA does not believe that the Scheme is the fairest compromise that could have been offered to customers with valid redress claims by the Group.
The Scheme was approved on 4 August and is now live. See Provident Scheme – 4 million people can now claim a refund for details about how it works and how to make a claim.
Why doorstep lending no longer works
At the end of 2019, Provident was already struggling with affordability complaints. Then several claims companies started putting through much larger numbers of complaints and this trend continued throughout 2020.
August 2020 was probably the point of no return for doorstep lending.
On 5 August in a case against the payday lender Sunny, the Kerrigan judgment found that breaching the FCA’s CONC rules on affordability checking was an unfair relationship under the Consumer Credit Act and that interest should be refunded. And when a customer borrows repeatedly from a lender, the lender has to take that history into account and not just make the same simple check it would make for a first loan.
This judgment is in line with how the Financial Ombudsman (FOS) had been assessing Provident affordability complaints.
The next day, the FCA published a report on Relending by high-cost lenders. which found that:
We have significant concerns that repeat borrowing could be a strong indicator of a pattern of dependency on high-cost credit and levels of debt that are harmful to the customer.
This is a major problem for any doorstep lending operation, not just Provident’s.
Sending a collector round is expensive and inefficient compared to digital lending and collection. It is only profitable when a large number of customers borrow repeatedly, paying high interest for years. This is exactly the sort of lending where FOS is ordering large refunds and the FCA says is harmful.
It’s not the fault of the claims companies
Bad credit lenders have blamed claims companies for the number of affordability complaints and putting them out of business.
Claims companies only look for business where firms have been lending irresponsibly and cases are being won at FOS. FOS has been upholding 75% of Provident complaints.
If claims companies were bringing a lot of frivolous or weak complaints, as many lenders have suggested, then their uphold rates would be low. But my article Do claims companies get good results at the Ombudsman? has FOS data showing that claim companies have the same uphold rate in doorstep lending cases that customers going direct to FOS have.
In their own words – what Provident customers have said
It seems right to end with what customers have said about their experiences of borrowing from Provident. Here are some of the thousands of comments made on Debt Camel’s doorstep lending affordability complaints page.
Me and my other half had some provident loans about 5 years ago. for the first couple years we were meeting all the repayments but we just kept borrowing and borrowing more and in the end we couldn’t afford the repayments and amounts are still outstanding.
Between 2008 and 2014 I had 22 loans from them. This started of with £200 shopping vouchers which were cleared then went on to a cash loan. That was paid off early by another loan for a higher amount. It then begins to escalate to 2-3 or 4 loans running at anytime.
My collecter continually texts me to see if I want another loan. I have clearly stated I CANNOT AFFORD IT but she comes back with max amounts available. In 2016 I was made redundant.. Although I walked straight into another job I was working 15 hours less. I told my collector and she offered me another loan but said she would keep my old employer on it.
My wife and i have paid over £5000 since 2012 to provident we have turned over loans to pay off other loans , were free of provident im 2012 when the manager visited our house to say he was looking to encourage previous customers back and offered us a £100 loan each , this started us on a downward spiral with them.
My Nan passed away in March 2018 and we found that at 84 years old she’s had 33 loans.
I paid fine and then in later years got behind so bad my credit rating fell badly,they offered me more to try pay of these ones,as well. I was robbing Peter to pay Paul, almost 150 pounds per week,my husband never knew about these loans, and I always paid regularly so he wouldn’t find out,and those last few years of payments took a lot out of me, worry was my middle name, I got help and cleared them, and then got more offers from them, by this time I was 67 yrs old how did I even get accepted for these loans at that age.
I never once signed in my own home I was in friends, collectors cars, in the street, sometimes I never even signed for them,the ones I did were already filled in so I only had sign my name,I still don’t know what they said.
Only my partner was working and we have 3 small children top up with tax credits
Each loan shows on my credit report that I was in arrears when issued a new loan … also have found an old provident book where it shows my partner had a big loan and couldn’t keep up repayments And in 2010 they amended his payments to a lower amount as it was in arrears the same day they gave me a loan.
I’ve had six loans with a value of £5,170, and £5,317 worth of interest, since 2015, but last year I borrowed £2,500 (as two loans) with £3,480 interest, however I returned the money and cancelled the agreement from a family intervention. Despite the intervention I took out a smaller loan, from being in a really bad place and having been bombarded without pause by text, email and post (You sure you want to cancel? / Can give you that money? / You can have a loan).
Question, on behalf of my Nan if i may, she has been using provident loans continually from the mid 80s, up until 2017, is there anything in the way of the unaffordable loans she can claim back?
My agent would sit outside in her car with her husband if I wasn’t in the previous day and wait for me to get home from work. She said her commission was based on what she collected each week – not how many loans she got people to take out. I was embarrassed when she came more than once a week as Im sure my neighbours knew why she was calling :(…… I was so uncomfortable seeing her sometimes I left the money & book under the mat and just text her & told her to post back. The thought of her hounding me for money more than once a week used to scare me :(
I have been With Provident for 20 Years Last Loan I had Was for £500. intrest was 600 0dd. 2018. ask for Loan not long ago and got turned down, Made a Complaint no Reply. thats What You get for being a good Customer.
I have 3 loans with Provident at the moment which I have referred to the Financial Ombudsman for a number of reasons. Following a complaint to Provident they have stated historically that between 2008-2015 I had 22 loans from them. With all of the interest added this totals over £27,000.
I am a single mum and have been on income support and jsa and at one point I had so many loans out I was paying £80 a week! I got to this stage as I would struggle to pay so would either refinance or get a new loan then would be ok for a few mths then would get in that circle again.
I don’t understand how they would let someone on benefits get so high?