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(Alliance News) - The Financial Conduct Authority on Wednesday criticised Provident Financial PLC's scheme of arrangement to resolve customer complaints, although it will not appear in court to oppose it.
Subprime lender Provident has offered to pay GBP50 million in compensation to customers under the scheme, after it sold loans without carrying out affordability checks. The loans were sold by Provident's consumer credit division, under brands including Satsuma Loans, Glo and Greenwood.
Customers are voting on whether to approve the scheme before a court hearing on July 30.
In a letter to the company, the regulator said that customers "stand to receive significantly less than the value of their claims" under the scheme. The FCA also said it was concerned about a low voting turnout of around 10% so far, and that Provident had not negotiated with customers.
But the FCA decided not to oppose the scheme in court as the consumer credit division would go insolvent if it does not proceed, and customers may not receive any compensation.
Shares in Provident were up 3.1% to 248.80 pence in London on Wednesday morning.
"We are committed to delivering the scheme successfully and the FCA deciding to not oppose the sanction of the scheme in court takes us one step closer to being able to do just that," Provident Chief Executive Malcolm Le May said.
A scheme of arrangement proposed by guarantor lender Amigo Holdings PLC, also in response to complaints of irresponsible lending, was rejected in court in May after the FCA opposed it.
Provident made amendments to its scheme following that ruling, including appointing a customer advocate to answer queries.
By Ivan Edwards; ivanedwards@alliancenews.com
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