Monday 19 November 2018

State's biggest moneylender Provident hit by financial storm

Provident chief executive Peter Crook stepped down as the lender issued a profits warning
Provident chief executive Peter Crook stepped down as the lender issued a profits warning

Charlie Weston Personal Finance Editor

THE CEO of the parent company of Ireland's largest moneylender operation has stepped down after it issued a profits warning and revealed it is being probed by regulators.

Provident Personal Credit is licensed by the Central Bank here to charge interest rates of up to 187pc to customers.

Agents for the moneylender tend to come to people's doors to offer the high-cost credit and collect the repayments.

Its British parent company Provident Financial has issued its third profit warning this year - saying it may lose up to €131m.

This prompted its share price to plunge by as much as 75pc, wiping £2bn (€2.18bn) off its valuation on the London Stock Market.

It also revealed it is being investigated by UK regulators, and has been ordered to stop offering a particular repayment product in Britain.

The profits warning comes as the Irish League of Credit Unions is encouraging more of its member credit unions to sign up to a lower-cost loan scheme designed to take on moneylenders.

The 'It Makes Sense' loan is offered by more than 100 credit unions, but there are almost three times that many credit unions operating in the State.

To apply for a loan, applicants need to bring just two social welfare slips to their local credit union, and their loan may be approved on the same day, or at most, within 24 hours.

Credit unions can charge no more than 12pc a year.

There are around 5,500 loans live at the moment.

A number of loans issued would already have been paid off in full, the league said.

An average loan is for €500 and is typically repaid over six months.

A person might be paying €15 in interest to a credit union for this type of loan, compared to €150 in interest to a moneylender, the league said.

Advocacy body St Vincent de Paul said this summer that up to 130,000 households who turned to it for help last year were paying back loans to moneylenders.

And a survey from the Irish League of Credit Unions found there has been an increase this year in the number of parents who say they will turn to moneylenders to cover back-to-school costs.

Around 4pc will borrow from loan sharks, compared to 3pc in 2016 and 2pc in 2015.

Shares in Provident Financial slumped the lowest on record as CEO Peter Crook stepped down and the subprime lender forecast a full-year loss and scrapped its dividend.

Provident first warned about problems at its door-to-door lending operation in late June.

The company now expects a pre-exceptional loss for the home credit business of between €87m and €131m. It predicted a €65.5m profit as recently as June. It does not break down its figures for Ireland.

The problems at Provident come as British sub-prime loan provider Amigo said it was considering an entry into the Irish market.

The lender, part of the Richmond financial group, offers loans in the UK with interest rates as high as 49.9pc and targets borrowers with poor credit ratings. A spokeswoman confirmed Amigo is looking at the Irish market.

"We're always looking at ways in which we can help even more people, and are considering a number of options including expansion into the Irish market but at the moment it's purely exploratory."

Irish Independent

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