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Provident Financial slumps as credit card division weighs it down once again

A £160mln refund programme is now more or less complete, but Vanquis Bank has seen more people miss credit card repayments as a result of the implementation of some new measures
debt notice
Vanquis reported a 71,000 drop in new account bookings last year

Sub-prime lender Provident Financial PLC (LON:PFG) expects full-year earnings to be at the lower end of expectation as its Vanquis Bank credit card business continues to weigh it down.

Vanquis is in the process of refunding £160mln to customers after it was fined £2mln last year for mis-selling repayment option plans (ROP).

READ: Vanquis Bank head steps down

FTSE 250-listed Provident expects that refund programme to be mostly completed within the next few weeks, but with one issue out of the way, another has presented itself.

In a bid to get people out of persistent debt, the UK’s Financial Conduct Authority recently told lenders to increase the minimum repayments and work more closely with struggling customers to figure out a payment plan that will enable them to eventually pay off the loan.

But both the higher repayments and willingness of banks to restructure or postpone repayments has put “some pressure on delinquency and arrears metrics”, Provident said in a trading update.

Higher loan impairments

As a result, impairment of some loans has been “higher than expected”, which means full-year profits will be at “the lower end” of its previous range of between £151-166mln.

“We have been progressively tightening our underwriting standards throughout the group in anticipation of the current uncertain UK economic environment we are facing,” said chief executive Malcolm Le May.

“We will continue to monitor underwriting standards in light of any changes in customer behaviour.”

Shares were down 20% to 519.2p on Tuesday afternoon.

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