* Provident acknowledges FCA concerns over plan
* But says scheme is fair
* Shares rise 2% in early trading
* Court hearing set for July 30
(Adds details from statement, background, share reaction)
By Muvija M
July 14 (Reuters) - Britain's financial watchdog will not
formally oppose Provident's compensation plan for its
doorstep lending unit in court even as it voiced concerns on
Wednesday that consumers were being short-changed.
The Financial Conduct Authority (FCA), which successfully
argued for a similar proposal by guarantor lender Amigo to be
rejected in London's High Court in May, said in a statement its
decision to not oppose Provident's plan was because the only
likely alternative was the insolvency of the business.
Separately, Provident acknowledged the concerns which were
expressed in a letter to it earlier in the week, and said the 50
million pound ($69 million) proposal was "fair and in the best
interests of Consumer Credit Division (CCD) customers".
Provident said if the court were to reject the scheme, it
would withdraw financial support for CCD, which would then be
expected to start insolvency proceedings, adding customers would
receive no redress in that scenario.
The FCA, which concluded that the plan was inconsistent with
its rules, principles and objectives, said it expected the
company to bring the letter to the court's attention at a
hearing scheduled for July 30.
'APPROVAL ALL BUT INEVITABLE'
Provident said that since placing CCD into managed run-off
in early May, its loan book has been reduced to 42 million
pounds, while 1,000 employees have left the business.
"We see approval as being all but inevitable," Numis
analysts wrote in a note.
Shares in the 140-year old sub-prime lender rose 2% to 2.45
pounds by 0725 GMT.
"While one cannot entirely rule out a potential U-turn on
the part of the FCA, that seems extremely unlikely upon close
examination of the letter," Goodbody analysts said in a note.
Provident decided in May to close the unit and exit the home
credit market altogether after a surge of customer complaints
and as the pandemic hit turnaround efforts for the business.
It has said an independent assessment by Ernst and Young has
backed the company's view that CCD had no value and will likely
face insolvency if the plan does not go through.
The industry, which lends to people who cannot get a loan
from mainstream banks, has faced intense regulatory scrutiny in
recent years for charging sky-high interest rates.
The court's rejection of Amigo's plan has left the lender
scrambling to come up with a new scheme or face potential
insolvency.
($1 = 0.7224 pounds)
(Reporting by Muvija M in Bengaluru, Editing by Iain Withers
and Emelia Sithole-Matarise)
