Troubled sub-prime lender Provident Financial PLC’s (LON:PFG) consumer credit lender subsidiary Moneybarn is facing a regulatory inquiry into whether it allowed car buyers to borrow too much.
The Financial Conduct Authority (FCA) has commenced an investigation into the processes used to assess customer affordability and for customers in financial difficulties, the company confirmed.
READ: Provident Financial backtracks on home credit strategy as it launches recovery plan
Provident revealed the FCA has been in discussions with Moneybarn over its processes ever since its licence was awarded in 2016 and will work collaboratively to solve the ongoing concerns.
The inquiry is the latest in a string of bad news that has afflicted the lender since a profit warning in June sparked by a botched plan to take its sales force in-house.
Since then, it has issued a second profits warning and seen an investigation start into another subsidiary Vanquis Bank.
READ: Provident Financial announces sudden death of chairman Manjit Wolstenholme
Last month, the group was also hit by the sudden and untimely death of executive chairman Manjit Wolstenholme.
She only took up the job in August when chief executive Peter Crook stepped down.
Neil Wilson, senior market analyst at ETX Global, says the car lending business is relatively small with only 50,000 customers out of the group’s two million plus.
But it is another headache for management at the worst time.
Provident is already facing an FCA investigation into the Repayment Option Plan (ROP) ancillary product offered by its Vanquis Bank subsidiary.
Estimates of the cost of a clean-up here are up to £300mln.
At the end of September, Provident had cash resources of £194mln, excluding the liquid asset buffer held by Vanquis Bank plus debt headroom of £70mln.
Wilson believes the real question is whether it can get its core doorstep lending business back in shape and on that front the outlook is very uncertain.
Shares fell 12% to 772p.
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