Times Article Part 127 Apr 2020 11:23
Looming debt cloud has silver lining - HTTPS://www.thetimes.co.uk/edition/business/looming-debt-cloud-has-silver-lining-6c6fh063g
Prominently displayed on Non-Standard Finance’s website is the catchline: “When lending direct, we meet our customers face to face”. Not anymore, they don’t.
Social distancing requirements due to the coronavirus crisis mean that the specialist lender for those denied credit by mainstream banks has had to change its day-to-day practices.
After a period of high-octane expansion, Non-Standard Finance has called a halt to all new lending, save to key workers such as NHS staff. It has had a special mobile app developed so that its agents can collect the regular repayments that they would normally pick up at the doorstep remotely. Along the way it has managed to wean a large number of its customers off paying their dues in cash.
From the point of view of its shareholders, the group has scrapped its financial guidance and medium-term targets, canned the final dividend and put off its annual results until next month.
Just as important, the backdrop to all of this is a likely recession that will mean its services are in demand so it will be keen to resume normal service as swiftly as possible.
Non-Standard Finance was founded in 2014 by John van Kuffeler after a 22-year career running its arch-rival, Provident Financial, which he tried, unsuccessfully, to take over last year. Mr van Kuffeler, 71, remains chief executive.
The group makes its money by lending to borrowers, often vulnerable, who have patchy credit histories and might struggle to find funds elsewhere. Often criticised for its high interest rates, it counters that its customers are riskier and would otherwise turn to loan sharks.
The group’s doorstep lending arm, operated through the Loans at Home brand and 64 offices, is the smallest of three divisions by value of loans, totalling £39.9 million to 92,400 customers as at the end of last year.
Before Covid-19, about 72 per cent of repayments were made in cash. The halt to home visits could have frozen that line of income.
But the company said yesterday that its collections rate was running at 75 per cent of its expected level, implying that a large proportion of its borrowers have basic bank accounts and were converted to electronic payments. Those that didn’t or were struggling have been put into forbearance plans.
The company’s largest division lends through a network of 73 branches, with 75,400 customers and a loans book of £218.3 million as at December 31. Although the vast majority of repayments on loans are processed electronically, it makes face-to-face meetings a key final requirement of the process.
The same is true of the second-largest operation, guarantor lending, in which a friend or family member commits to step in if the borrower cannot pay. This unit had made loans of £107.4 million to 32,600 customers by the end of the year.
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