Provident Financial has set aside £50m to repay customers who were sold unaffordable loans. Customers will not get all their money back as the court has agreed on a compensation scheme with the firm to ensure that it does not go into liquidation.
Why has this happened?
Provident has been running doorstep loans since the 1880s, earlier this year they withdrew from the business blaming changing industry and regulatory dynamic. Although their lending style was legal it proved controversial as it amounted to nothing more than ‘legal loan sharks.
Last year, the Financial Conduct Authority (FCA) said prolonged re-lending could be harmful to borrowers and the company faced a flood of complaints that affordability checks were not carried out when doorstep loans and payday loans were granted. It said the second half of last year had seen a 200% rise in complaints compared with the first half.
That led to the High Court approved scheme because Provident said it could not afford to carry on paying full refunds to customers who were winning affordability complaints. The Financial Ombudsman had been upholding about 75% of complaints. The FCA said it did not approve of the scheme but as Provident has stopped providing doorstep loans, it did not object to it in court.
Who can claim?
The scheme covers customers who had taken out an unaffordable loan between 6th April 2007 and 17th December 2020 from one of Provident’s personal credit brands.
They are doorstep lender Provident, Satsuma payday loans, Greenwood - a doorstep lender defunct since 2014 - and Glo, a guarantor loan brand.
Some 4.2 million people borrowed from the different brands during the period but not all are expected to have a valid claim, with the court estimating that up to 30% of them could apply for redress.
What is an unaffordable loan?
An unaffordable loan is based on your financial situation, if you can make your loan payments on time but this then leaves you short of money and you then fall behind your bills then it was unaffordable.
A loan is only affordable if you can make the payments on time and still be able to pay for bills, living and other debts.
How can you make a claim?
Our team of expert have many years of experience dealing with mis-sold loans. If you contact us one of the team will guide you through the claims process making this as stress-free as possible.