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Provident Financial’s Satsuma loans arm under investigation as complaints soar

Provident Financial PLC (LON:PFG) is facing a regulatory inquiry into its Satsuma loans business after the number of complaints from customers surged during lockdown.

UK regulator, the FCA, is looking into the practices at Provident’s consumer credit (CCD) division between February 200 and 2001, the company said in a statement today.

Provident Financial itself started an operational review of its CCD business in December after the volume of complaints jumped by 200% in the second half of 2020, which resulted in a cash charge of £25mln or a ten-fold increase on the previous year.

To deal with the complaints and the escalating cost, Provident said it is setting up a scheme of arrangement to ring-fence CCD complaints and protect the rest of the company.

The scheme will cover potential redress claims up until 17 December 2020 and Provident said it has engaged in dialogue with the FCA to get to this point.

The company added it will fund legitimate scheme claims with £50mln and will cover further Scheme related costs estimated at approximately £15mln.

If the scheme is not approved, Provident said it will likely place its CCD arm into administration. At the end of December, customer receivables stood at £139mln and had reduced further to £118m at the end of February

Provident Financial added that the appointment of investigators does not mean that the FCA has determined that rule breaches or any other contraventions have occurred.

Elsewhere, Provident said trading had been better than expected in the final quarter of 2020 and that underlying profits for the year would be slightly ahead of management expectations.

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