* Provident says home credit business under investigation
* Company lays out 50 mln pound complaint settlement plan
* Shares plunge 25%
(Adds background on the company, updates share move)
March 15 (Reuters) - Provident Financial on Monday
outlined a 50 million pound ($69.7 million) plan to settle a
jump in complaints and claims against its door-to-door lending
business during the COVID-19 crisis, warning the unit could
collapse if it is not approved.
Shares had plummeted 29% to 1.86 pounds by 0830 GMT on
Monday, and were set for their biggest one-day drop in nearly
four years.
Provident, which lends to people who do not meet the lending
criteria of mainstream banks, said Britain's Financial Conduct
Authority was investigating conduct issues concerning its
Consumer Credit Division (CCD) over the past year.
The update is a major setback for the company, which was
plunged into a crisis in 2017 when it undertook a botched
overhaul of its home credit business by replacing its army of
self-employed doorstep collection agents with direct employees.
Provident has since been working towards repairing its
brand, and in 2019 fended off a hostile bid from smaller rival
Non-Standard Finance.
Its hopes of turning CCD profitable again were derailed by
the COVID-19 crisis, which hammered lending volumes and drove up
costs.
The FCA is looking into CCD's lending criteria and how it
has applied the financial ombudsman's decision on its complaint
handling process over the past year, said Provident, adding that
the probe was unlikely to end until 2022.
Provident's Moneybarn unit was fined last year by the FCA
over unfair treatment of customers following a separate
investigation, while another probe into its credit card business
Vanquis Bank led to it paying out tens of millions of pounds in
compensation.
The company said if the settlement scheme does not go
through, it was likely that CCD would be placed into
administration or liquidation.
"CCD was on track to break even on a monthly basis during
2020, prior to COVID-19," the company said.
Complaints to the FOS across the home credit market tripled
in the second half of 2020 from the first, driving up
Provident's payments to customers by ten times to 25 million
pounds.
"Given PFG's history, regulatory investigations should not
come as a major surprise," KBW analysts, who have a "market
perform" rating on the stock, said.
"(We) would not expect any operational repercussions for
Vanquis and Moneybarn as a result but (it) could impact
relationships with customers, regulators and suppliers."
($1 = 0.7177 pounds)
(Reporting by Muvija M and Chris Thomas in Bengaluru; Editing
by Ramakrishnan M. and Jan Harvey)
