– An independent assessment by Ernst and Young backs Provident Financial’s view that its doorstep lending unit will likely face insolvency if its 50 million pound ($69.6 million) settlement plan is not endorsed by a UK court, the company said on Monday.
Referring to its consumer credit division, the company said: “The assessment undertaken by EY further supports PFG‘s position that CCD has no value.”
The subprime lending sector has been under regulatory scrutiny in recent years for charging sky-high interest rates to people who are struggling financially, with customer complaints against them surging since the pandemic took hold.
Provident said its decision to close CCD, which lent to people who would have been turned away by mainstream banks, and the settlement plan were “fair and in the best interests” of CCD customers.
The company last month placed CCD into managed run-off, which typically means it is closed for new business, after a surge in customer complaints against it during the pandemic, and said it would exit the home credit market altogether.
The High Court in April granted Provident leave to convene a meeting of its creditors, which is scheduled to take place on July 19. If creditors approve the settlement plan, the final court hearing will take place on July 30.
Provident Chief Executive Malcolm Le May reiterated on Monday that customers will likely be left with no redress payments if the plan does not go through.
The company, which has appointed a customer advocate for the scheme, said it would take on 5 million pounds more than its initial estimates in costs related to the plan, taking the total to 20 million pounds.
It said it had received one potential offer for CCD but that was to wind up the division, but said it had rejected the proposal as it was less attractive financially than managing the run-off of the division itself.
($1 = 0.7189 pounds)