UPDATE – the Scheme has now been approved by the court.
See Provident Scheme – 4 million people can now claim a refund
for how to make a claim and what will happen in the Scheme.
Provident Financial Group (PFG proposed a Scheme of Arrangement to reduce the refunds it has to pay to customers given unaffordable loans through its Provident Personal Credit (PPC) subsidiary.
There are three stages in getting a Scheme approved. Provident is now in the third stage – seeking court approval:
- On 22 April 2021, the voting arrangements for the Scheme were approved by the court.
- From 17 May to 19 July, customers could vote to approve or reject the Scheme. A large majority approved the Scheme.
On 14 July, the FCA published its second letter of concerns about the Scheme. The FCA says the Scheme went against its principles but as the alternative is insolvency and the doorstep lending business is being closed, the FCA will not oppose the Scheme in court.
- On 30 July, a second court hearing was held to decide whether the Scheme should go ahead. The judgment will be published next week, probably on 4 August.
My previous article Provident proposes a Scheme to cap refunds gave the background to the Scheme – the increasing numbers of affordability complaints, the changing legal and regulatory environment, as well as the pandemic.
An overview of the Scheme
4.3 million customers affected
PFG has operated Provident Home Credit, Greenwood Home Credit, Satsuma payday lending and Glo guarantor lending through its PPC subsidiary. PFG is closing its PPC subsidiary and no longer offers doorstep or payday loans.
The Scheme covers loans taken after April 2007 for all of these brands.
4.3 million people have had one of these loans.
The Scheme does not affect PFG’s Vanquis and Moneybarn customers. The credit card lending and car finance operations are profitable and go through a different subsidiary so PFG is not including them in the Scheme.
How the Scheme will work
The Scheme will cap the refunds PFG has to pay to Provident customers.
Many people have been making complaints the loans were unaffordable and winning these complaints at the Finacial Ombudsman.
Provident is proposing to put aside £50 million to divide between the people who have claims for unaffordable loans upheld in the Scheme. This is a LOT less than the “real” refunds people should get.
Provident has given an example suggesting people may get paid 10% of their proper refund. But my numbers suggest that is too optimistic and the refunds may be a lot lower, see below for details.
If the Scheme is not approved, PFG says its PPC subsidiary which operates the Provident doorstep lending and Satsuma brands will go into administration.
In administration customers can also make a claim for unaffordable lending:
- there would be no cash refunds for customers;
- customers with upheld Claims who have a current loan would have their balances reduced or cleared through the “right of set-off”.
The Scheme Timetable
17 May – 19 July – Voting on the Scheme
Over 428,000 of the approximately 4.2m creditors affected by the Scheme voted , approximately 420,000 voted in favour of the Scheme, while approximately 7,500 voted against.
30 July – Second Court Hearing
This considered the results of the voting and the fairness of the proposed Scheme. The FCA did not oppose the Scheme in court. It was decided the Scheme should go ahead.
August 2021 – February 2022
If the Scheme is approved at the Second Court Hearing it will start.
People who voted on the Scheme will automatically have had a Claim submitted. People who didn’t vote will be to submit a claim on an online page for six months.
First half 2022
Provident expects payments to be made. I think it may be late in that period as Provident will have to allow time for appeals to be made and reviewed.
What customers might get from the Scheme
See Provident Scheme – 4 million people can now claim a refund which looks at how the Scheme will work.
We don’t know in detail how Provident will make a decision about which loans are unaffordable. But that is not a reason to not make a claim!
Is this Scheme fair?
If £50 million was genuinely all the money there was available, then you may think “Well that’s life, that’s all there is”.
But it isn’t!
PFG is not a company that is running out of money. Its Vanquis and Moneybarn operations are profitable and it is planning on expanding them.
If PFG wanted, it could delay expanding its other operations and use the money saved to pay more to the customers who should get refunds. or it could ask its shareholders to contribute money through a rights issue or a share placing.
But PFG seems more interested in its shareholders’ interests and not in giving its customers adequate compensation.
The FCA has pointed out in its letter about the Provident Scheme:
the FCA does not support the Scheme for the reasons set out in this letter and 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.
What do you think?
The comments on this article are now closed.
Please see the new article Provident Scheme – 4 million people can now claim a refund which will be kept updated throughout the Scheme.