Doorstep lender Provident Financial has increased it’s efforts to keep it’s proposed “Scheme of Arrangement” by appointing a “customer advocate”, to help borrowers understand it’s proposal. The inclusion of a “customer advocate” for Providents SOA, follows the Amigo ruling, in which their SOA was refused by the high court.
An “advocate” by definition is “a person who represents another person’s interest“. In this case, Provident’s “customer advocate” is charged with helping borrowers to understand it’s Scheme of Arrangement, including the implications and negatives of the scheme, as well as answering any questions from borrowers.
Provident have also reported that it’s “scheme of arrangement will entail higher-than-expected costs” but this will be paid by the Provident Financial Group, rather than be taken from the £50 million put aside for the Scheme of Arrangment.
Doorstep lender Provident Financial wants to introduce a scheme to limit compensation paid to customers who were mis-sold loans, in a move similar to guarantor lender, Amigo Loans.
Provident are looking to introduce a “scheme of arrangement” to deal with a flood of complaints from customers who have been mis-sold loans. The scheme would reduce the amount it would have to pay to customers to settle their complaints.
The scheme comes after Provident announced that it couldn’t carry on paying refunds to customers for mis-sold Provident Home Credit Loans and Satsuma Payday loans. This is simply due to the volume of customer complaints and their validity.
The Financial Ombudsman (FOS) have been upholding 75% of customer complaints against Provident, in addition to the Financial Conduct Authority investigating Provident’s affordability assessments and complaint handling since February 2020.
In sheer volume of customer complaints, and the involvement of the FOS and FCA, signal that many of the loans taken out from Provident, Glo, Satsuma and Greenwood, where unaffordable, and the right checks were not made before the relevant loan was issued.
The Scheme would apply customers to whom loans were given by Provident, Glo, Satsuma or Greenwood, or who may have guaranteed a loan from Glo, between 6 April 2007 and 17 December 2020.
For the 4.3 million current or former customers, who could potentially make a refund claim, Provident will be contacting them via email or letter, explaining the scheme and outlining the key dates.
Customers are able to vote on the scheme in July 2021. The court will then consider whether to approve the scheme or not.
If the scheme is approved, it would ensure that all customer complaints would receive something, however, the £50 million pot of the company’s money, put aside for the scheme, would not be enough to satisfty all claims in full.
Customers would receive a portion or a set amount of their entitled loan refund. Numbers wise, it is estimated that customers would received between 2%-10% of the full refund amount, under the scheme.
If the scheme is approved, customers have a window of 6 months to make a claim; if customers do not make a claim within 6 months, they loose any right to compensation.
Provident have estimated that they would start making payments under the scheme during the “first half of 2022“, if the scheme is approved.
If the scheme is not approved, it is likely that Provident, Glo, Satsuma and Greenwood would be placed into administration or liquidation.
This means that no customer complaints would be unlikely to be settled either with a financial refund or compensation.
For borrowers who would still be paying off their loan, it would able mean that their loan would still need to be repaid, or if they have a valid claim, they may be able to claim a balance reduction or write-off.
Voting will not start until after the First Court Hearing in Late April/Early May 2021. Provident will no doubt publish more details before the voting starts. The FCA could also ask for changes to the scheme before voting starts.
The exact answer to this question is to early to call, as both options have postive and negative implications. We hope to be able to provide more information to help you made an informed decision closer to the voting period.
If you have already made a claim to Provident for a mis-sold loan, or are a current Provident customer, they will be getting in touch with you via email or letter. A copy of this letter, can be found on the Provident website here.
If you have not yet made a claim to Provident for a mis-sold loan, you still can, however, Provident will not be working on any new claims, until they know the outcome of the scheme. If the scheme is approved, you will have to resubmit a claim under this scheme.
Whilst we wait for news on Provident’s Scheme of Arrangement, either way, we will keep you fully informed and up to date.
If you have experienced being mis-sold another type of financial product, a Guarantor, Payday or Doorstep Loan, PCP Car Loan or Catalogue Card Credit, we can help. We want to help you get the compensation you deserve, before any other schemes pop up!
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