Provident Financial and lending to people who are on low incomes

Lending and borrowing have caused all sorts of problems in recent years. The authorities are now proceeding with more caution, after their disastrous experiment with too much credit up to 2007 and too little in 2007-8.
The bulk of lending to individuals in the UK is to let us buy assets we cannot afford to buy outright. Most lending allows people to own a home. Over most time periods since 1945 houses have gone up in value, making the loans safe for the lenders and usually a sensible commitment for the borrowers. The lenders can normally get their money back if an individual can no longer afford the interest charges by agreeing a sale of the property. The older pattern of borrowing on mortgage when comparatively young also increased the security for the lender, as younger people often go on to gain promotion and pay rises making the mortgage more affordable. This would only cease to make sense if the authorities so deflated the system that they brought home prices down a long way.
Lending to let people buy cars also has some features of asset backed lending.If any individual is unable to keep up the payments the lender should be able to sell the car for all or most of the value of the loan. Only if the market overextended car loans greatly and then the authorities created recessionary conditions generally would this become a problem for the lenders who would stand to lose more from falling car prices.
The most difficult area is lending to people who need money to pay day by day bills. Here the lender has to make individual assessments about need and capacity to repay. Until recently Provident Financial has been successful for its shareholders by judging how much it can lend to people without assets and in need of immediate cash. It has chosen usually to lend for short periods of time at high interest rates, making it a profitable business. When this industry was subject to a Competition enquiry it was accepted that the clients on the whole wanted the service offered and were prepared to pay the high rates involved. Some would say they had no choice, as there was no lower priced credit on offer and they needed the money.
This week news has come out that Provident by changing its business approach is now finding it difficult to collect all the money owed on outstanding loans, and is unable to write as much new business as it was accustomed to do. Partly for regulatory reasons and partly for efficiency reasons the company decided to replace its network of Agents going house to house, building relationships with people in need of credit. These agents were rewarded based on their performance at collecting cash from clients. Instead it recruited 2500 Customer Experience Managers and equipped them with modern technology to enable more management information and regulatory control of the relationships. They are remunerated on a different basis. So far they have found it very difficult to collect all the money owing on the loans they have and to write enough new ones to keep it running as before.
What is the right answer to lending to people in need of cash for day to day spending? Could anyone do it for lower rates of interest? How should such a business adjust to new technology and current regulatory requirements? It does not look as if the problems at Provident are signs of some new massive credit crisis. They operate in a part of the market where the main banks do not get much involved.

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72 Comments

  1. Spratt
    Posted August 25, 2017 at 5:33 am | Permalink

    So modern technology replacing human beings wasn’t the right approach in an industry where human frailty and the pitfalls of life affect the outcomes. Usually Mr Redwood suggests that embracing modern technology is a panacea. This story shows how simplistic that idea is.

    • Dame Rita Webb
      Posted August 25, 2017 at 8:34 am | Permalink

      More than likely the costs of compliance with the FCA. This is a perfect example of the road to hell being laid with good intentions. No longer do the underclass have easy access to a bank branch or simple life assurance/savings from the industrial life assurers. The compliance overkill from the Financial Services Act has led them more than likely into the hands of the loan shark and his baseball bat

    • acorn
      Posted August 25, 2017 at 9:03 am | Permalink

      Talking about simplistic ideas, have a read of the OBR Fiscal Risks Report http://budgetresponsibility.org.uk/docs/dlm_uploads/Fiscal-risks-July-2017-presentation.pdf There are some interesting numbers in it. A lot of the banking crisis numbers are left out, they would swamp the real economy numbers, the ONS does the same, hence metrics like PSND-ex.

      Alas, this report is a bit of a nonsense in MMT terms. The OBR like the IFS perpetuates the lie that our sovereign fiat currency issuing government, has to borrow or tax to get its own manopoly currency back, before it has any of it to spend. Don’t worry, the UK Treasury and its wholly owned Bank of England, will never run out of Ponds Sterling. BUT, it could run out of things available to buy, but that’s another more frightening story.

      Interesting comment on the costs of the financial crisis. “… Economy around 15 per cent smaller today than on pre-crisis trend. Around £300 billion of GDP lost in a single year”. The history books will tell of the UK’s economic lost decade, caused by Osborne austerity and the Conservative quest for a budget surplus.

      • acorn
        Posted August 25, 2017 at 5:22 pm | Permalink

        JR when you get around to posts on the subject of Electric Vehicles (EV), please can you ask your audience the following question.

        “Considering your current family lifestyle on a working day and a weekend, when, and where, would you be wanting to re-charge your battery powered EV; AND, how quickly would you want it to be charged up.”

        For a comparison, a filling station pump with fill your motor with Unleaded at about 38 litres a minute. A litre of Unleaded contains about 10 kWh of energy. So you are recharging your petrol jalopy with 380 kWh of juice in one minute. For the moment, forget about the primary energy conversion / emission efficiencies of both these fuels, as presented to you at the filling / charging stations.

  2. Lifelogic
    Posted August 25, 2017 at 5:41 am | Permalink

    Loans on absurdly high interest rates of perhaps 25%-1000%+. as advertised endlessly on daytime TV (together with rip off life insurance and funeral insurance) are clearly not of benefit to anyone in general and certainly not to the already desperate. They imply a very large non payment rate and just create masses of misery for thousands of the already desperate and their relatives.

    The BBC radio 4 taking, as would be expected, an absurd line on the multiple false rape accuser. Instead of questioning why the police failed to notice all her many false claims (appalling incompetence by them) they spent almost the whole of the time saying how rare false claim were, less than 1% according to the DPP figures someone claimed. How does the DPP know?

    Is not suggesting that 99% of men accused of rape are guilty rather prejudicial to them getting a fair trail? The current line of the DDP under the new leader seems absolutely appalling to me.

    Having said that I cannot see that sending her to prison for 10 years is sensible. She probably needs mental heath treatment rather than prison.

    The BBC also absurd on the (slight) reduction in net migration figures. Focusing on wage costs and problems for business. Are higher wages not a good thing? The problem is that it is the good ones who tend to leave and the others do not/ This given the absurd tax and benefit system we have under soft socialist dopes Hammond and May.

    • BCL
      Posted August 25, 2017 at 7:31 am | Permalink

      I take the point about sickeningly high interest rates but I also think there’s another way to look at it, one I’d adopt I think, if I were such a lender. If someone I don’t know who’s a really bad risk says “can I borrow £100 for a week” I might say “yes but I’d like £10 as a fee because you are a bad risk”. The charge would just be what I think it’s worth to take the risk, rather than a return on my loan as interest, at least in my mind. I’d think in effect that I wasn’t charging interest I was just saying “if you want the cash that’s the fee I want”The £10 may equate to millions% APR but from my perspective it’s just a fee for taking on a risky loan. I know the APR is the “right” way to look at it but I think my example has a reality to it as well. I’m no defender of PayDay loans and their ilk, far from it, but I do think there is this alternative way to view the transaction which puts the lender in an less critical, but realistic, light

    • NHSGP
      Posted August 25, 2017 at 8:54 am | Permalink

      Basic mathematics.

      If you lend money that you have borrowed at 5%, to people where 20% don’t pay anything back, what rate do you need to charge before you factor in costs?

      Bit like basic maths and should be added to the exam questions.

      You borrow £100, you have to pay back £105

      For the people borrowing from you, only 80% pay back anything and they need to pay 105 at the end of the year.

      The interest rate is then 105/80-1 = 31.25%

      What’s the default rate for FP?

      What are their costs of going door to door to collect?

    • Bob
      Posted August 25, 2017 at 9:19 am | Permalink

      “wage costs and problems for business”

      it was reported this morning that the auto enrolment, apprentice levy and minimum wage hikes will have an inflationary effect because businesses will need to pass on the extra costs to their customers.

      What was wrong with the old apprenticeships whereby you were paid enough to cover your bus fares, and you had to prove yourself before expecting any pay rises?

    • Dominic Johnson
      Posted August 25, 2017 at 10:34 am | Permalink

      The interest rates are high, but the charges are minimal
      Borrowing £100 for a week and repaying £105 is hardly extortionate
      Yet the APR is 260%, which sounds unbelievable

      • ChrisShalford
        Posted August 25, 2017 at 7:12 pm | Permalink

        Well observed: say the lender’s admin costs were £4, we could say that £100 was repayment of capital, £4 was an admin charge and £1 was interest. This would give a far more believable APR. A lot of it is about presentation.

    • Lifelogic
      Posted August 25, 2017 at 1:28 pm | Permalink

      So Boris Johnson says Libya should learn from May’s mistake and not have an early election. He misses the point, that was not May’s mistake. Her mistake was to go into an early election waving a punishment agenda & manifesto promising tax increases, pension cuts, benefit cuts, endless pain, more and more intervention, expensive energy and zero in the way of a real uplifting Conservative vision.

      This while endlessly repeating the phrase “strong and stable government” like a demented robot.

      All this just after they had to backtrack on Hammond’s attempted mugging of the GIG economy mugging. Doubtless due to return soon following the idiotic left wing Taylor report.

      • Mitchel
        Posted August 25, 2017 at 3:06 pm | Permalink

        What Boris means re Libya is that the interests “we” support in Libya would not win.The French,I see,are breaking ranks and moving towards supporting the other side which is supported by Russia and Egypt.

        I don’t know why,as part of our austerity programme,we don’t just close down the Foreign Office and save ourselves both cost and trouble.

  3. jack Snell
    Posted August 25, 2017 at 5:47 am | Permalink

    Why borrow now when we don’t know if the brexit talks are going to blow the whole house down?

    • Ian Wragg
      Posted August 25, 2017 at 7:23 am | Permalink

      Usual remainiacs response to everything. Why should Brexit affect house prices or anything else.
      Gideons stupid taxes on cars and second homes has done more damage than anything else.
      Now the declared aim to banish fossil fuel vehicles and boilers is the next disaster about to happen.

  4. paulW
    Posted August 25, 2017 at 5:54 am | Permalink

    Topic this morning is surely a diversion of no consequence given the state of uncertainty at the present time in the financial markets..

    • miami.mode
      Posted August 25, 2017 at 7:37 am | Permalink

      Paul, pray tell us a time when there wasn’t uncertainty.

    • Nig l
      Posted August 25, 2017 at 8:57 am | Permalink

      What a supercilious answer probably sent from the comfort of middle/upper Englandshire when having the ability to borrow £50 because the washing machine has broken down, means the difference between feeding the kids or not. As usual Regulators boiler plate their requirements so a number of providers have dropped out and with that and a new Chief Exec (now ex) a model that worked for the consumer has collapsed leaving them to fall potentially into the clutches of loan sharks.

      Interest rates are high reflecting the very high cost of administration (door to door personal service) and the cost of writing off bad debts. This market is sub sub sub where often people do not have bank accounts or use them purely to get at whatever money is due to them, benefits etc. There are no savings, it is a hand to mouth existence and can only be served by a collector knowing the family personally with the discipline of knock on the door weekly or whenever to collect repayments.

      There are credit unions but they are small, fragmented and often require people to save a small regular amount when even that is beyond them.

      I read a parliamentary report on this that covered all the issues and was not critical. The customers were happy, complaints to the Ombudsman almost nil and it worked. Another example of a busy body interfering system leaving the people it is supposed to protect, at greater risk.

  5. hefner
    Posted August 25, 2017 at 7:03 am | Permalink

    The question should be: why in a country with the 5th or 6th largest GDP (but ranking in the twenties for GDP PPP per capita) are there people needing money to pay for day-to-day bills, if unemployment is at better than 5%?
    All the rest of the exposé looks to me, as so often on this blog, as a diversion.

    • a-tracy
      Posted August 25, 2017 at 4:05 pm | Permalink

      They are often workers who can’t afford to save, retirees or single parents needing loans for things like replacement tyres often caused by our poor quality rural roads with unseen potholes to enable them to get to work; roof tiles falling off; insurance claim excess; going back to school uniform inc. shoes, and new blazers if going to High School; new white goods to replace machines that can no longer be fixed. Loans are often for 23 or 52 weeks and repayments range from about £3.50 to £17.50pw for loans of £100 to £500. Good housekeepers can plan a year in advance for say a school uniform for next year but something can crop up out of the blue that zaps people’s savings.

      • hefner
        Posted August 25, 2017 at 7:55 pm | Permalink

        Exactly, and in that respect the UK (or at least a part of it) is sliding slowly but surely towards a kind of developing country. When will the UK get its Grameen Bank?

        • a-tracy
          Posted August 31, 2017 at 1:44 pm | Permalink

          Perhaps you should suggest it to JK Rowlings, the loans are mainly small amounts to women with interest of 20% (reducing the balance). Five members in each group of lenders, who do this on trust – no paperwork, they don’t underwrite the debts of each other BUT they can’t get any more credit if one of them defaults. I wonder what happens when one can’t or just refuses to repay? I wonder who collects the debt and if they have to walk to repay it themselves individually or they all know each others loans and one collects on the other five. Very interesting.

  6. The PrangWizard
    Posted August 25, 2017 at 7:12 am | Permalink

    If it ain’t broke, don’t fix it.

    Someone else has been a ‘smart-arse’ and failed.

  7. Monza 71
    Posted August 25, 2017 at 7:14 am | Permalink

    We are onto a subject here where for decades no politician has dared to tell the truth.

    While there are many households that are poor because of circumstances beyond their control (abandoned wives with children etc ), it is a fact that a large proportion of the poor in the UK are people who don’t have much in the way of qualifications.

    This is not because the education system has failed them but because they lack intellectual capacity and do not have the skills to perform well at an interview or to hold down anything other than the most menial and low paid job.

    This further manifests itself in extremely poor lifestyle choices such as smoking, drinking, gambling, compounded by a reliance on costly and unhealthy ready meals and takeaways. A large proportion of these households also pay for unnecessary and expensive Sky subscriptions and over-use of pay-as-you-go mobile phones.

    In an attempt to compensate their children for their own failings, poor parents then spend unreasonably large sums on Christmas presents they can’t afford. It is no surprise that the month with the highest incidence of non-payment of rent is January.

    All these unnecessary and undesirable habits take a very large proportion of an already severely limited household budget. A spiral of poor judgements then has a dramatic effect on health and life expectancy yet it is ironic that a good diet is much cheaper to follow than a poor one. This group is then the most likely to compound their problems by taking out payday and Provident loans in order to make ends meet.

    Our increasingly technological society is making things even more difficult for this large group of people. Put simply, the way our society is developing will cause them to lag even further behind.

    The standard response from Government, and particularly the left, is to put in place benefits and other subsidies when the only real answer would be a refreshingly honest appraisal of their situation followed by a programme of re-education.

    Taking out loans with Provident or Wonga is most definitely no answer whatsoever.

  8. agricola
    Posted August 25, 2017 at 7:20 am | Permalink

    The way you describe it, it sounds like a management full of theory which they have applied to screw up big time. Provident Financial’s original business plan of using agents in close contact with customers, making doorstep decisions would seem an infinitely better way to run lending at the bottom end of the market. No doubt someone saw a saving in not having to pay agents. It was a better way to control borrowing at this level than operating like the Shylock pay day loan companies. The agents will have moved on so a reversion will not be so easy, apart from which who would want to return to such a company.

    Question, why are we expending so much intellectual effort on this subject when there is so much more of serious interest going on. I know some newspapers seem to have a silly season when everyone is supposed to be on holiday, but we prefer meat and there is plenty of it out there.

    • Narrow Shoulders
      Posted August 26, 2017 at 8:29 pm | Permalink

      I disagree @agricola.

      The depth and breadth of views and comment from posters makes most subjects interesting and many topics have been done to death.

      Today’s post was a pleasant alternative to the supplements.

  9. Sir Joe Soap
    Posted August 25, 2017 at 7:21 am | Permalink

    Clearly you need a model where the lender has collateral over copper bottomed future income.
    Next question.

  10. Duncan
    Posted August 25, 2017 at 7:25 am | Permalink

    I have a revolutionary idea concerning such personal matters. Take personal responsibility for yourself and your affairs and prevent these types of issues being politicised and weaponised by the left for political gain

    It isn’t loan companies that exploit those on ‘lower incomes’ it’s the political left who exploit those on ‘lower incomes’ because those on ‘lower incomes’ happen to be in possession of a valuable commodity, a vote

    In today’s politics all of life is politicised because politics is power. It is exhausting in the extreme

  11. MikeW
    Posted August 25, 2017 at 7:34 am | Permalink

    Borrowing to buy fancy cars by people of modest means is false economy and should be discouraged. Borrowing to buy houses in this time of great uncertainty should also be discouraged for the moment. Problem is that if people find that their circumstance change and they find it too difficult and they can’t keep up with the payments then overall it would be very bad for the economy. Extending credit for non productive reasons should also be discouraged- people should be encouraged to save up for cars and other things like holidays- and now that the foreigners are leaving the country in their droves our own younger brit set have a greater opportunity to get out in the fields early in the morning to pick the fresh veg and fruit and in that way maybe save up a little extra for the incidentals. D’you think?

  12. Leslie Singleton
    Posted August 25, 2017 at 7:41 am | Permalink

    Dear John–As I have said a number of times before here you always seem to find a way to downplay or hardly even mention the fundamental importance of credit analysis. If an individual hasn’t enough cash (and don’t let anybody tell you that it is anything other than cash, ever, that repays loans) he shouldn’t be borrowing. The idea that there might be some governmental or any other magic “right answer” (to keep the people happy as they watch their houses appreciate) is not the Way To Go. I do not have the slightest doubt that you have considerable high level experience of Merchant Banking plus a lot of other good stuff but I doubt you have much, if any, handling loan requests. There is an infinity of lending out there that has nothing to do with lending against the security of houses. For a start wait till interest rates shoot up as they will (Think pressure cooker).

    • a-tracy
      Posted August 25, 2017 at 3:14 pm | Permalink

      Say you’ve got three children Leslie, one a new born so you’re having to take a short career break, your husband’s wage is completely used up now because yours is no longer there other than SMP. Your washing machine dies, this means trudging to the laundrette, children in tow if you have one nearby or getting a new machine for £3.50 per week probably less than it would cost at the Laundrette, are you going to deny this woman doorstep lending to replace her machine because she hasn’t got loads of savings and is maxed out on their small overdraft. That machine will probably last her another 10-15 years. Not everyone has family that can give them this loan or a willing bank Manager.

      • Leslie Singleton
        Posted August 25, 2017 at 5:31 pm | Permalink

        Dear Tracy–Say, rather, you are a shareholder in a bank–Would you want your share capital being used on what you call doorstep lending? I confess I am not sure exactly what you mean by this term but I get the drift. Bleeding heart scenarios come much worse. One particular boss of mine, in between chewing glass, would have shouted at us that we were in the banking business and not a charitable institution. We did not have credit losses (not one, ever). Life can undeniably be tough, believe it or not I know. I have to admit our typical customer was far removed from the sort of example you describe, the woman you mention being simply unbankable. I do not seek to prevent others lending in the way you would like but whatever they might be they would not be my idea of a bank–the trouble would be their keeping going on such a basis (with BTW people screaming at you that your rates were too high).

    • Mitchel
      Posted August 25, 2017 at 3:14 pm | Permalink

      All very sensible but we have an economy based on consumption and to keep it going people must be given the wherewithal to keep spending.It’s madness,I know but doesn’t this all go back to Bill Clinton and his legislation in the States to force banks to lend to those of dubious creditworthiness-the so-called trailertrash loans.

      • Leslie Singleton
        Posted August 25, 2017 at 5:45 pm | Permalink

        Dear Mitchell–I am bloody but unbowed from my last effort and am not particularly sure I understand exactly what an economy based on consumption means but if it means lending money ad lib which the bank won’t get back so that the borrower can go and spend I am not in favour. Since you mention it, I was in the States lending money (On a three year on-the-job credit training programme, all over Hell as it happens) at the time you mention; and don’t forget the ‘red lining’ problems the insurance industry there had just trying to do their job. Forcing banks to lend and insurance companies to insure when commercially they don’t wish to is the kiss of death.

        • Mitchel
          Posted August 26, 2017 at 12:48 pm | Permalink

          Yes,I do mean that and,no,I’m definitely not recommending it!

          Around 7/8 years ago I recall the BBC giving airtime to some silly woman from some quango who argued that withholding loans from the uncreditworthy poor was wealth discrimination and should be outlawed.The feeble response from the BBC presenter was just to ask what if they can’t repay,to which she replied the government should give them more benefits so that they could.

          It was simply jaw-dropping.I knew then that this county was finished.

  13. Ali Choudhury
    Posted August 25, 2017 at 7:45 am | Permalink

    There ought to be more encouragement of credit unions, I found them a very useful vehicle for responsible, peer-to-peer lending during my time up north.

  14. JM
    Posted August 25, 2017 at 7:53 am | Permalink

    Provident reminds us of one of the great lessons in life: if it ain’t broke, don’t fix it!

  15. agricola
    Posted August 25, 2017 at 7:55 am | Permalink

    Suggested Subject List for future meat courses.

    1. Protectionism of EU being likely to damage their fledgling trade agreement with Canada.
    2. Protectionism of Macron’s France in trying to block cheaper labour from within the EU.
    3. Future of CAP when we leave the EU
    4. Possibility of other members leaving EU when we Brexit and succeed.
    5. Analysis of the Euro, ECB, and the state of banks throughout the EU.
    6. Treatment of Sarah Champion by her own party and the implication that such treatment feeds the abuse of young girls.
    7. Political Correctness within our police forces and all public institutions. Effect on life in the UK.
    8. Poland’s stance on immigrants.
    9. Prospect of driverless trucks on our roads.
    10. Need to legislate to cover the behaviour of cyclists on our roads and their public liability.

    I’m sure other contributors have many, so we do not have to feel sorry for Provident Financial’s shareholders.

    Reply Today’s was not pro the shareholders but about a central issue behind our current slowing economy – how much credit is good, and how should the regulators behave. I have tackled several of thew topics you cite and will doubtless return to them from time to time. There are important topics other than the EU and migration.

  16. Mark B
    Posted August 25, 2017 at 7:59 am | Permalink

    Good morning.

    We need to know in this day and age of minimum wages and generous benefits why they need to borrow just to get by from day-to-day. Is it because the cost of living, rents, food, services etc are too high ? I think if you can tackle those then people may not need to borrow on such poor terms.

    Just a thought.

    • fedupsoutherner
      Posted August 25, 2017 at 4:53 pm | Permalink

      Mark B

      No, in a lot of cases it’s too many tattoos, an expensive mobile, Sky subscription, make up, beauty treatments, false nails and alcohol, all of which they cannot really afford but won’t go without. I know plenty of people like this. They should learn to get their priorities right. Put out money for bills first and then spend if any left over and if not then go without. This is how I was brought up and we need people to be more responsible. Benefits have never been so rewarding.

  17. oldtimer
    Posted August 25, 2017 at 8:07 am | Permalink

    Mr Gove has done his best to undermine the car market, and also those who borrowed or leased to acquire new diesel engined cars, by declaring that they will be banned by 2040. This has already affected second hand values and quite possibly will leave many people under water when their day of reckoning arrives to pay up the balance owed or sell at a loss.

    • hefner
      Posted August 25, 2017 at 3:42 pm | Permalink

      There is an interesting (although a bit old, 2008) report from racfoundation.org called “Car ownership in Great Britain”. In it, it is reported that most cars are scrapped before 20 years on the road.
      So is it not time to stop moaning about the disappearance of Diesel engine cars in 2040, in a bit more than 22 years in the future?

      • oldtimer
        Posted August 26, 2017 at 9:06 am | Permalink

        I am commenting on the impact of his remarks today! I will not be around in 40 years time.

  18. Liam Hillman
    Posted August 25, 2017 at 8:25 am | Permalink

    How about we treat the banks just as any other business? If they get themselves into trouble for whatever reason, let them go to the wall and damn the consequences. “Too big to faill” is just too damned big. The taxpayer should not be made to pick up the pieces when giant finance houses suffer the blowback from poor business decisions.

  19. Establishment
    Posted August 25, 2017 at 8:34 am | Permalink

    Those in financial markets if suffering from feelings of uncertainty, nervousness, anxiety, tension, stress should avail themselves of quite good NHS farmed out programmes to very small private companies ( paid by the tax-payer at huge cost ). These involve walking clubs, one-to-one verbal therapy with trained people, advice on diet and how to lose weight with personal weekly checks on your menus and weighing you. However they do mistakenly, in my view, advocate using less sugar but simultaneously encourage eating fruit ( containing huge amounts of sugar and acids leading to tooth decay and a sugar-dependent and alcohol dependent appetites )
    At the end of the day those in financial markets who a year after the Brexit-vote are still feeling anxious and uncertain should think about a career change to something more to their individual bent and mental abilities

  20. Tabulazero
    Posted August 25, 2017 at 8:38 am | Permalink

    No mention of the FCA investigation in Provident Repayment Option Program (ROP). Don’t you think this is something worth mentioning if indeed Provident is suspected to have (offended ed) ?

    Reply Not stopping you raising it, but it is not the topic I am discussing at it relates to credit card insurance.

    • Tabulazero
      Posted August 25, 2017 at 2:03 pm | Permalink

      Do you think as a MP that the state as a role in regulating lending practices in that end of the credit market ?

      Reply Yes

  21. Establishment
    Posted August 25, 2017 at 8:41 am | Permalink

    I have witnessed the disasters, a couple of times, in such institutions. Essentially it is a detached poor management at fault attempting to justify its power and knowledge over and above its minions. The result is that those below lose a great amount of time ( and money! ) fiddling with various technologies sending data of customers to a management not having a clue about its customers’ lives or the great skills of its workforce. It does not rate its workers having skills at all in fact. Such companies deserve to go out of business.

    • The PrangWizard
      Posted August 25, 2017 at 11:48 am | Permalink

      Bang on! I have seen it too. It is commonplace and explains why large parts of business is so inefficient.

      Rather, such poor managers should lose their jobs.

  22. NHSGP
    Posted August 25, 2017 at 8:51 am | Permalink

    So lets see. Asset backed lending. How does that work with you John?

    Mr Min wage is effectively forced to lend to you, his old age pension contributions.

    No of that is asset backed, since you’ve spent every penny. To make sure he doesn’t cotton on, his pensions are off the books just like Equitable life.

    NI contribtuions, plural, come to 18% of income. For Mr Average that is £6,666 this year. Mr Average does that for his working life. 313,000 of value paid to you. [adjusted for inflation]

    If you make to retirement the average time spent retired is 18.6 years. You get 6K of value back and that’s 112K of value paid back.

    That’s just over 1/3rd of what you pay in.

    That’s wealth destruction on a massive scale and with more cuts being planned, its even worse.

    1. Forced lending
    2. False accounting
    3. No assets
    4. Negative returns.

    What’s the difference between that and the FPs and Wongas of this world? The effect’s the same.

  23. William Long
    Posted August 25, 2017 at 8:53 am | Permalink

    Provident Financial have been around for very long time and are undoubtedly supplying a real demand in the market place. Until the current debacle Provident had a reputation for good management, and indeed I can remember it as one of the very few ‘secondary’ financial institutions that traded without a tremor through the 1974 crash. A major reason for it’s success was the closeness of the relationship between it’s sales force, commission driven though it may have been, and the customer. It therefor seems strange to say the least, that the importance of the relationship was undervalued when the recent changes were put in place. The reasons behind these changes might have seemed good to a management consultant but are a stark illustration of human relationships outweighing technology and theoretical efficiency.

  24. alastair harris
    Posted August 25, 2017 at 9:02 am | Permalink

    Most lending in “sub-sub-prime land” only works by personal contact and flexibility. Something most “financial services” companies forgot a long time ago.

  25. bigneil
    Posted August 25, 2017 at 9:16 am | Permalink

    ” lend for short periods of time at high interest rates, ” – – one current advert on tv has interest rates of an incredible . . .1’301 % – -I can remember another tv advert years ago that had interest rates of well over 2’000%.

  26. Posted August 25, 2017 at 9:21 am | Permalink

    Currently we seem to be inundated by adverts for cars on some form of rental agreement which I feel is going to be the next financial meltdown. I’ve been looking for a new car and every salesman that I’ve spoken to is more interested in how I’m going to pay for it than trying to make a sale. When I say I’m paying outright they seem to lose interest, although even then they seem to think that I’ll be borrowing from my bank rather than actually having saved the money!
    With this huge amount of borrowed money being spent on new cars, I feel that this could be the next area of the financial markets to collapse. This could lead to a flood of nearly new cars on the second-hand market; perhaps I should wait a while before spending my money!

    • Know-Dice
      Posted August 25, 2017 at 3:13 pm | Permalink

      The trick is to initially indicate that you are going for a PCP or whatever it’s called and negotiate the best price, then at the last moment switch to cash.

      The salesperson is only interested in their commission.

      There is a suggestion that you should take out a PCP and then cancel it in the “cooling” of period 🙁

  27. Prigger
    Posted August 25, 2017 at 9:25 am | Permalink

    The Government and Local government knocked the stuffing out of door-to-door loans and collections. Laws regulating what and how an operative can say anything to a debtor, how many times they can visit a home, even if the person is out each time, the actual times of day they can call, how many phone calls even to an unanswered phone they can make, how many letters can be sent in a certain timescale..all to do with potential harassment accusations, courts not backing up a company taking a debtor to court by prohibitive court costs on the company and the court actually reprimanding the company. Also much increased insurance costs for a company employing debt and loan collectors with the necessity of them having a mobile phone and making hourly calls back to the office for security reasons with a dedicated office staff checking on them hourly and making graphs and so on online to be sent to management who sit down doing nothing but look at useless information and passing it up the management line for others to sit more expensively and uselessly. With often badly working technologies of laptops and smart phones used by people “in the field ” who need to come off motorways and routes several times per day engaging in useless and very time -consuming “feedback” and “checking” to office based staff.
    The point. Field Workers of any company enjoy their job because they DID have no-one on their back. They were genuine lone workers. Now they are not. Many choose not to continue working in a completely changed job. They may as well work in an office with others, out of the rain, no speed traps designed to put them out of work, eventually, despite their best efforts.

  28. a-tracy
    Posted August 25, 2017 at 9:28 am | Permalink

    They used a self-employed agent model and moved to a fixed employer/employee full-time relationship model, isn’t this what the Labour party want, and probably changed due to the threatened new legislation that applies employees terms to sub-contractors.

    I suspect many of the thousands of part-time self-employed agents will be celebrating Provident’s bad news after being unceremoniously laid off after building up their mini businesses, however, I also think Provident will recover in time and sort out its collections and doorstep lending, unless their previous agents find another similar lender to move their business to in the meantime, unless of course the other lenders are forced down an employee model collection business and then they’ll be in this similar position in the end just in time for Provident to capitalise on it.

    Provident takes lots of hits on none repayment, who else wants to step in and borrow unsecured credit – go on then.

  29. Bert Young
    Posted August 25, 2017 at 9:35 am | Permalink

    Loan companies like Provident who make short term loans have always featured high risk . I do not know much about the disciplines Provident imposed to regulate their face to face business , what I do know is when there is a gap between central objectives and an individual customer , lapses in decision will occur and a potential for bad debt can result . Gone are the days when the likes of a Bank Manager was intimately in touch with his local market ; also gone are the days when a careful low debt lifestyle existed .

    Were I Provident I would redesign my whole business from the top down . They obviously cannot proceed the way they have done in the past .

  30. Peter
    Posted August 25, 2017 at 9:55 am | Permalink

    The problem is specific to the company itself. It changed from freelance to full time collection employees and its software would not work properly to arrange meeting times with its customers.

    Other companies still flourish at that end of the market. The problem is not customers inability to pay it is more a question of setting interest rates that do not exploit these customers.

  31. graham1946
    Posted August 25, 2017 at 10:00 am | Permalink

    Customer Experience Managers and computers were never going to do it in such a business. It is far more difficult to refuse to pay a man on the doorstep or pretend to be out than switch off a computer or answer the phone. The human relationship is key and what matters surely, in something so personal – if you want to continue to borrow you will keep to the terms generally. Why do these whiz kids who try to run things think modern is always best? How many long serving traditional companies have been ruined by trying to get the last penny out of a system which is not designed for it? It may be old fashioned, but putting Agents back on the streets is probably the only way to go and the slow build up of trust which seems to have been thrown away in a trice. It may already be too late.

  32. Stred
    Posted August 25, 2017 at 10:03 am | Permalink

    Car loans may be affected by the current hysteria over diesel pollution. The bans and charges have destroyed the new and second hand market and prices are a third of last years. This is because ministers will not be seen to defend pollution claims by pressure groups that use estimates of small shortening of lifespan and then apply a proportion to the whole population, giving the thousands of deaths as though they are actual people dropping dead. The effect of the bans will not reduce particulates an NOx by much and the improvement in lifespan will not be noticeable.

  33. RDM
    Posted August 25, 2017 at 12:12 pm | Permalink

    But this is one side off the story, borrowing for Consumption, necessary or not.

    For these people borrowing to invest, is even more problematic!

    If initial deposits aren’t enough, the Regulatory Requirements, and the cost of doing Business is destroying many SME’s, like Owner Drivers.

    And, for them, building a Business is the only real way to build a pension!

  34. PeterL
    Posted August 25, 2017 at 2:01 pm | Permalink

    How are poor families to escape jail if they can’t pay the BBC Licence Fee? They have to borrow from somewhere. perhaps we could abolish the fee, or at the very least remove enforcement from the criminal justice system.

  35. jack Snell
    Posted August 25, 2017 at 3:46 pm | Permalink

    It’s always the bright lights and sparkle that impresses the poor unfortunates that can least afford new cars and expensive holidays abroad and they very seldom think about pay back time- they should be discouraged and for this reason there should be a clamp down on some types of advertising and system of extending loans- call this meddling in the market if you wish- but just like we have laws about gambling so should we have stricter laws to regulate borrowing from banks or any other loan business in place.

  36. alte fritz
    Posted August 25, 2017 at 3:54 pm | Permalink

    If pay day lending does not happen legally then it will happen illegally. That is why society needs companies like Provident. As a rules, borrowers from such lenders only repay so that they be able to borrow again. Only closely managed personal contact works. What is objectionable is the high pressure advertised approach which makes such lending seem desirable. It is a necessary evil.

  37. Russ Brown
    Posted August 25, 2017 at 4:13 pm | Permalink

    Give powers to the DWP to give small short term crisis loans to the working poor and this will put an end to food banks.

  38. Selachimorpha
    Posted August 25, 2017 at 4:21 pm | Permalink

    This company took advantage of virgin territory ( naive borrowers who had been previously protected from the ilk of Ted Heath’s ” unacceptable face of capitalism”) in former Communist Bloc Poland, Czech Republic and Slovak Republic. Also virgin sets of laws relating to private insurance and private borrowing. Well, Czechs, Poles and Slovaks have got street-wise. How, if at all, has this affected the progress of Provident Financial? Nothing untoward one hopes and prays. :-0)

  39. Russ Brown
    Posted August 25, 2017 at 4:41 pm | Permalink

    Pay day loan companies are making a decent profit as they can afford large commissions to third party affiliates working for them.

  40. Sir Joe Soap
    Posted August 25, 2017 at 5:07 pm | Permalink

    More appropriate for you to be discussing solutions for small companies who have been mistreated by RBS, and how to avoid the lifeblood of the economy being sucked out by these parasites.
    In comparison neighbour Fred not being able to meet his TV licence this month is trivia.

  41. Juiliet
    Posted August 26, 2017 at 9:16 pm | Permalink

    Never understood why people expect private companies to operate as public sector and ‘keep bums on seats’ when the business is crying out for improvement and tech change. People should be more concerned that there’s too many pay day loan companies on high street or accessible on the Internet to low paid workers. Whole sector needs reform and scaling back from people on low pay who will regret when it too late living beyond there mrans

  42. Juiliet
    Posted August 26, 2017 at 9:17 pm | Permalink

    Whole payday loans sector needs reform and scaling back from people on low pay who will regret when it too late living beyond there means

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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