21 Sep The Demise of Provident Home Credit
A Good Thing or Bad?
I need to make two disclosure type ‘admissions’ up front. I have both worked for Provident Home Credit division and had a loan from them too. This puts me in the enviable position of being able to see the company in both lights, customer and agent though I took the loan at the same time as being an agent so not quite the same.
A quick search of a site like Indeed will give you a flavour of the culture at a firm like Provident https://uk.indeed.com/cmp/Provident-Personal-Credit . To be fair, this piece isn’t meant to be a hatchet job on the Provvy, they’ve been around an awfully long time and you’d think they would know what they’re doing.
However, they got hit by our regulator the Financial Conduct Authority (FCA) when they allowed Claims Management Companies (CMCs) to go after them for compensation for ‘unaffordable’ lending practises. I’m not too sure which year they started allowing this to happen but my feeling is it was 2018 or thereabouts.
Here’s a list of the companies who have gone bust since that inspired decision and thanks to Cobra Payday loans for taking the time and trouble to compile the list:
Good Riddance To Bad Rubbish
Good riddance to bad rubbish you may well think or possibly even say out loud and I must admit I’d be halfway to agreeing with you purely based on what I saw and heard while working for them. After working for them for a year or two I simply couldn’t stand the micro-managing legal loan shark scenario and left to join………………another firm just like them.
So like them that they stated in the interview they aspired to be like Provident. I left after one week and joined the last remaining doorstep lender there was to work for in my area and guess what? Yep, another Provvy clone – I left after one day and set up on my own.
The reason for giving you my potted work history in the doorstep lending industry is to convey the lack of choice someone has once they’ve tapped their friends and relatives for a loan or gift.
The DSS don’t do loans like they used to so that door is firmly closed and the FCA like to make a big play out of using ‘alternatives to short term high cost credit’ (that’s a payday loan to you and me). Easy for them to say because apart from Credit Unions who might lend you money if you’ve saved with them and most likely live in their area, there are no alternatives.
Doing The Maths
Which brings us back to Provident and their culture of getting people into debt to finance their business. Nothing wrong with that you may well think as that appears to be how capitalism works and that’s the system we are currently using. No, nothing wrong but when that firm routinely gives money to people they know may not be able to afford to repay them you have to ask yourself what on earth is going on?
When I worked for Provident it was at the beginning of the current FCA vogue for ‘affordability’ and at that time nobody had been fined and the CMCs hadn’t been unleashed onto the industry.
That means things were pretty much as they’d always been. As an agent we were given a ‘round’ of people to collect money from and give loans out to.
There would typically be 50-150 people in your round and as a part time self-employed agent it took a couple of afternoons and an early evening to get around to seeing everyone. Payment was pretty much a flat 10% of everything you collected and a typical round produced about £4,000 if everyone paid. At Provident (the same as at every doorstep lender) their no-pay rate was around 50%.
That means that half of the people you lend money to don’t and won’t or can’t repay the loan from week to week.
So the people who do pay are basically funding the ones who don’t but Provident’s book was so big they’d worked out their profit margins so that if most people are borrowing an average £400 and paying back 80p in the £1 in interest then the Provvy are making money. As one would expect at those rates of interest.
Time To Flee The Scene
There were 2 incidents while working there that stand out for me as pivotal moments. The first was on being given a ‘lead’ to ring and go and give a loan to. People would ring up looking for a loan or get in touch via the web and then be passed on to us agents if in our area to give out the money.
The chap had stated he was on income support (welfare in the US) so I knew he had £76 a week to live on and buy his food and pay bills with. Not enough to repay a loan of any amount really. I stated this to my manager that I didn’t want to do the loan because he was unemployed and had no way of repaying.
It was obvious that he’d go on the missing list from week 1 if we did the loan. I was told in no uncertain terms that if I didn’t issue the loan I would have my agency taken off me and I’d be unemployed. It was also stated it wasn’t my money so why care?
The last point was correct but they didn’t seem to get that if I can’t collect the weekly payment then I don’t get paid so what was the point in lending in the first place?
It was then obvious to me that they really weren’t interested in whether people could actually repay their loans or not as they’d always come up with extra fees to cover any shortfalls and pursue people mercilessly for their missing payment.
As a side note the customer took the loan out and was never seen or heard from again.
Which brings me onto incident 2 which nailed the lid firmly shut in my mind and I left shortly after. I walked into the office on a Monday morning to be greeted by the sound of my manager screaming down the phone at what turned out to be a frightened old lady who had missed her £5 weekly payment on the Friday before.
Once he’d finished terrorising her verbally he hung up and started laughing as though he was the biggest winner in history. I think not sir. That did it for me and I couldn’t bring myself to continue giving out money for a firm like that to chase down collecting.
It’s worth noting that the manager in question was not representative of the company as a whole but he did reflect a way of thinking and doing business which had obviously taken root a long time earlier. Now everyone there is employed on full time contracts and there are no more self employed agents it may well have changed for the better.
To give credit where it’s due that would largely be down the FCA bringing intense pressure to bear on Provident and forcing them to be more open and accountable with their lending and collection practises and making sure people can afford the loan in the first instance.
The Provvy no longer does doorstep lending since the CMCs were let loose and they’ve come to an arrangement to give back some money to customers who were given loans they couldn’t afford to repay.
A Mixed Bag of Conclusions
As ever in matters like these there’s a balance of good and bad. The good news is that because of the FCA introducing an affordability policy for all companies involved with lending, Provident have been forced into making sure their customers can actually afford to repay the loans they’re taking out.
That can only be a good thing but to be honest you’d think in an industry that depends on people repaying their loans, it would have been done in the first place without recourse to a regulator making them do it.
The fact that said policy has meant the biggest doorstep lender in the country has decided to stop that form of lending is only a bad thing if it means their former customers now end up in the hands of proper illegal loan sharks.
While there are still one or two companies doing doorstep credit (for now) they will have another avenue to explore when looking for credit but if the CMCs go after them too then the FCA could find itself with a problem of its own making.
In many ways the Provvy have been a victim of their own success and long history of lending in people’s homes. Hopefully the culture that breeds managers who like shouting at pensioners has gone for good along with lending to people who obviously can’t afford it.
It now remains to be seen whether the demise of Provident is going to be a good thing or bad.
We hope it’s for the best and that those who were wrongly funded can get some redress via the courts.