Moneylender Provident Financial has decided to close its home loan division, as the Covid pandemic hit its recovery efforts.
Provident is one of the largest lenders in the Irish market.
The British firm, a subprime lender since its inception in 1880, said it planned to put the managed business into liquidation or consider a sale if there was interest.
The exit is expected to cost Provident up to £100m.
Sinn Féin finance spokesman Pearse Doherty said Provident’s decision underscores the need for swift action in the personal credit sector here.
The Central Bank said it had been informed of Provident’s decision to stop lending new money here.
He said that while business decisions relating to the general operation and strategic direction of regulated companies are within the purview of the companies’ boards and management, the Central Bank expects the company to discuss with its customers of the implications of this decision, in accordance with regulatory requirements.
The Central Bank said that although Provident is no longer making new loans, customers can continue to engage with the company as usual for questions about existing loans.
Provident said it will be contacting all customers over the next few days.
The Central Bank added that if a customer has a question regarding their loan of money, they should visit www.providentpersonalcredit.ie for their frequently asked questions.
They should also speak to their agent.
“We encourage all consumers who are considering taking out any form of credit to ensure that you are borrowing from a regulated lender by checking the Register of Regulated Businesses on our website www.centralbank.ie,” he said. declared.
“Before taking out a high-cost loan, consumers are encouraged to consider other credit options better suited to their needs that may be available from other regulated lenders,” he added.
Provident had been trying to revive the business after it botched a revamp in 2017 when it sought to replace its army of freelance door-to-door collection agents with direct employees.
But his efforts, including a plan for the unit to break even last year, were derailed by the Covid-19 crisis, which hammered loan volumes and drove up costs.
“In our view, the mortgage market is in irreversible decline,” said Provident chief executive Malcolm Le May.
Rising complaints from claims handling companies, the financial impact of Covid-19 on the lending division and the changing regulatory environment made the business commercially unviable, he said.
Several of these firms, including UK payday lenders Wonga and Quickquid, have closed in recent years due to complaints and regulatory scrutiny of their business model.
Provident said it plans to build on its existing expertise in unsecured personal loan products in 2021, in the “mid-cost” segment of the market.
The company, which has a banking license, said the unsecured lending business was an important step towards its plans to become a broader banking group for the financially underserved customer.
Goodbody analyst John Cronin said the new initiative would likely be channeled through Provident’s credit card business, Vanquis.
Provident presented a £50m plan in March to settle a rise in complaints and claims against the subprime unit and said the firm was also under regulatory investigation over conduct issues .
A UK court has cleared the settlement plan, with a meeting of the company’s creditors scheduled for July, Provident said today.
Provident recorded a pre-tax loss of £113.5m in 2020, compared to a profit of £119m the previous year.
Pearse Doherty said today’s news from the state’s largest pawnbroker that it will no longer make loans from May 10 underscores the need for quick action in the personal credit industry. .
He said there is no doubt that Provident’s withdrawal from the Irish market requires a coordinated response to protect the interests and resilience of borrowers.
“The Government should now support Sinn Féín legislation to cap the cost of credit that lenders can charge borrowers,” Mr Doherty said.
He said the government allows pawnbrokers to charge an annual interest rate as high as 287%, with many families locked in a vicious cycle of debt.
“The Finance Minister should now work with Sinn Féín and the Finance Committee to ensure that this legislation protects borrowers and puts an end to the outrageous interest rates charged by these lenders,” said Pearse Doherty.
He also said the minister must introduce a bill that would raise the credit union interest cap from 1% to 2%.
“This would allow credit unions to play a bigger role in the personal credit market and provide an affordable and more sustainable option for borrowers who need access to credit,” he explained.
Pearse Doherty also called on the government to publish a financial inclusion strategy for the next decade, to improve access to credit among low-income and vulnerable groups who are excluded from the provision of financial services.