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| Provident Financial to hire debt collectors to revive doorstep lending | Provident Financial to hire debt collectors to revive doorstep lending |
| (4 months later) | |
| Company cancels full-year dividend and recruits staff, including many axed earlier this year in failed restructuring | |
| Jill Treanor | |
| Fri 13 Oct 2017 18.58 BST | |
| First published on Fri 13 Oct 2017 18.00 BST | |
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| Provident Financial is hiring debt collection agents, after axing them earlier this year, in an attempt to revive its door-to-door lending operation, which is on course to lose £120m in 2017. | Provident Financial is hiring debt collection agents, after axing them earlier this year, in an attempt to revive its door-to-door lending operation, which is on course to lose £120m in 2017. |
| As the subprime lender confirmed the cancellation of its full-year dividend, it said it was recruiting 300 more staff to collect debt payments door to door. Many of these had worked for the company before a disastrous new strategy led to a profit warning in August. | As the subprime lender confirmed the cancellation of its full-year dividend, it said it was recruiting 300 more staff to collect debt payments door to door. Many of these had worked for the company before a disastrous new strategy led to a profit warning in August. |
| The warning wiped nearly £1.7bn off the stock market value of the 137-year-old group when the share price plunged from £17.45 to 589.5p. | The warning wiped nearly £1.7bn off the stock market value of the 137-year-old group when the share price plunged from £17.45 to 589.5p. |
| The reorganisation involved replacing 4,500 self-employed collection agents with 2,500 full-time “customer experience managers”. The CEMs were given iPads but were sent to the wrong addresses, or the correct ones at the wrong time, and were unable to make sales or collect payments. As a result, debt collection rates fell. | The reorganisation involved replacing 4,500 self-employed collection agents with 2,500 full-time “customer experience managers”. The CEMs were given iPads but were sent to the wrong addresses, or the correct ones at the wrong time, and were unable to make sales or collect payments. As a result, debt collection rates fell. |
| The debacle prompted the departure of Peter Crook as chief executive. | The debacle prompted the departure of Peter Crook as chief executive. |
| The company has admitted the system “was too prescriptive in the way the workforce was managed, removing the ability of local management to prioritise and allocate resources”. | The company has admitted the system “was too prescriptive in the way the workforce was managed, removing the ability of local management to prioritise and allocate resources”. |
| Provident has rehired its former debt collection chief Chris Gillespie, who quit in 2013, and is recruiting CEMs to work part-time. | Provident has rehired its former debt collection chief Chris Gillespie, who quit in 2013, and is recruiting CEMs to work part-time. |
| The third quarter trading update on Friday helped reassure the City that the situation was not getting worse as Provident enters the crucial pre-Christmas trading period, and the shares jumped by 15% to more than 900p. | The third quarter trading update on Friday helped reassure the City that the situation was not getting worse as Provident enters the crucial pre-Christmas trading period, and the shares jumped by 15% to more than 900p. |
| Manjit Wolstenholme, the chairwoman and acting chief executive, said: “Since the last update, we have moved quickly to appoint new leadership in home credit who have a deep understanding of the business and recognise the importance of the relationship between our frontline staff and our customers.” | Manjit Wolstenholme, the chairwoman and acting chief executive, said: “Since the last update, we have moved quickly to appoint new leadership in home credit who have a deep understanding of the business and recognise the importance of the relationship between our frontline staff and our customers.” |
| A replacement for Crook, who is forfeiting pay and bonuses worth up to £4m, is being sought. They will take over a business facing problems in its debt collection arm and under investigation by the Financial Conduct Authority over the sale of a credit card product by its banking division, Vanquis Bank. | A replacement for Crook, who is forfeiting pay and bonuses worth up to £4m, is being sought. They will take over a business facing problems in its debt collection arm and under investigation by the Financial Conduct Authority over the sale of a credit card product by its banking division, Vanquis Bank. |
| There was no update given on the FCA investigation into how Vanquis sold a “repayment option plan” that allowed customers to freeze repayments on debts. Analysts at Shore Capital have estimated that consumer redress could run to £240m. | There was no update given on the FCA investigation into how Vanquis sold a “repayment option plan” that allowed customers to freeze repayments on debts. Analysts at Shore Capital have estimated that consumer redress could run to £240m. |
| The banking operation has started to become more selective about granting loans given the uncertain economic backdrop created by Brexit. | The banking operation has started to become more selective about granting loans given the uncertain economic backdrop created by Brexit. |
| Provident said year-on-year growth in Vanquis was 13%, which had been delivered against credit standards that have recently been tightened, recognising the uncertainties faced by the UK economy. | Provident said year-on-year growth in Vanquis was 13%, which had been delivered against credit standards that have recently been tightened, recognising the uncertainties faced by the UK economy. |
| Earlier this week, Vanquis was fined £75,000 by the Information Commissioner’s Office for sending more than 870,000 texts and 60,000 emails promoting credit cards. | Earlier this week, Vanquis was fined £75,000 by the Information Commissioner’s Office for sending more than 870,000 texts and 60,000 emails promoting credit cards. |
| Satsuma, Provident’s online payday lending operation, is expected to report a small loss for the year. Its website says a £1,000 six-month loan would require customers to pay £896 in interest. | Satsuma, Provident’s online payday lending operation, is expected to report a small loss for the year. Its website says a £1,000 six-month loan would require customers to pay £896 in interest. |
| In the debt collection arm, losses are expected to be between £80m and £120m, assuming debt collection and sales continue to improve. In September, lending was down by £6m a week on the same period last year, compared with the £9m a week fall recorded in August. | In the debt collection arm, losses are expected to be between £80m and £120m, assuming debt collection and sales continue to improve. In September, lending was down by £6m a week on the same period last year, compared with the £9m a week fall recorded in August. |
| Debt collection rates, which are usually about 90%, rose from 57% in August to 65% in September. | Debt collection rates, which are usually about 90%, rose from 57% in August to 65% in September. |
| But analysts at Royal Bank of Canada remain sceptical. “The small recovery in collections should not be applauded, as this is as we anticipate and management still expects a large loss,” they said. | But analysts at Royal Bank of Canada remain sceptical. “The small recovery in collections should not be applauded, as this is as we anticipate and management still expects a large loss,” they said. |
| While changes are being made to the debt collection operation, the company is not reverting to its previous model of self-employed agents, but taking people on as employees. | While changes are being made to the debt collection operation, the company is not reverting to its previous model of self-employed agents, but taking people on as employees. |
| Rivals have been cashing in on Provident’s problems, with Morses Club saying its business was growing after hiring agents from its bigger rival. | Rivals have been cashing in on Provident’s problems, with Morses Club saying its business was growing after hiring agents from its bigger rival. |
| Provident Financial | |
| Borrowing & debt | |
| news | |
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