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25 Apr 2022

Provident gives payout update on mis-sold loans - should you appeal?

Redress payments will be capped at 4p-6p per every £1 owed

Borrowers who were mis-sold loans by Provident will receive just a fraction of the interest and fees they are owed this July.

Provident Financial Group (PFG) confirmed to Which? customers would get 4p to 6p for every £1 due and the final figure will be confirmed after any customer appeals.

PFG closed its doorstep lending business - Provident Personal Credit Limited (PPC) - in December last year and wrote off tens of thousands of existing customers’ loans.

Here, we explain why customers are owed compensation and what to do if you’re unhappy with the amount you have been offered.

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Loan customers owed compensation

PPC provided short-term loans to people likely to have experienced financial difficulties, charging interest as high as 1,577.7% APR. The Financial Conduct Authority (FCA) said many of whom may have been financially vulnerable.

Provident set up the legal redress programme, known as the 'scheme of arrangement' after receiving customer complaints that the right affordability checks were not carried out when the loan was issued.

It was open to borrowers who took out loans between April 2007 and 17 December 2020 and included its other brands; Greenwood, Satsuma and Glo.

In August 2021, Provident won a High Court Judgement to cap the total compensation costs at £50m after previously warning its four million customers its consumer credit division may have to go into administration due to high compensation payouts.

It was also facing an investigation by the FCA into whether it carried out proper affordability checks before lending to borrowers.

Can I get compensation?

In August, a dedicated claims portal was set up for borrowers who believed they had been mis-sold loans.

This closed on 28 February this year, which means if you did not apply within this time you are unable to get compensation.

If you did claim, you will be contacted by Provident before 1 May to find out if your claim was upheld and how much you will be owed.

Customers will get 4p-6p per £1 owed. So if you are owed compensation of £100, you would get £4-£6.

The final figure will be confirmed once appeals have been assessed by June and payments will take place in July.

If you’re happy with the amount you should login to the online portal and provide your bank details. If you don’t respond within 30 days the decision will be taken as final.

What if I'm unhappy with the amount offered?

You should log an appeal with Provident within 30 days of being contacted if you want to dispute the claim decision.

You can do so via the claims portal and follow the portal appeals journey. You can also contact Provident on 0800 056 8936 but you will need evidence to hand.

Provident will then have another 30 days to reach an agreement with you and if one cannot be met, it will be passed onto the scheme adjudicator who will make the final decision.

You will not be able to take the complaint any further after this as the Financial Ombudsman Service (FOS) will not take on complaints where there is a court-approved redress scheme in place.

You cannot dispute the following in your appeal:

  • The value of the compensation fund which is set at £50m 
  • Whether the scheme should have been approved to replace how Provident handles complaints 
  • The claim rules - which were approved in the High Court 

Concerns raised over appeals

There are some concerns that Provident has not provided enough information for customers to successfully appeal.

Debt advisor Sara Williams, founder of Debt Camel, said letters sent out to customers don’t include the dates of the loans or the amount of interest paid on weekly or monthly repayments and rejected loans not upheld for compensation have not been included in the list.

She said the decision about whether a loan is affordable depends on these factors so not knowing them makes it hard to explain in an appeal why the wrong decision was reached.

‘By giving little information about the loans with the decision, Provident is making it hard for people to appeal. This is not a responsible way to treat customers, many of them vulnerable,’ she added.

Provident told us it had no further comment to add in response to the concerns.

Sara has advised people email informationrequests@provident.co.uk  if they need further information to make their appeal and to check every loan they ever took out has been included.

What if I took out a loan after 18 December?

You will have to go through Provident’s normal complaints procedure as this is outside the separate scheme of arrangement.

You can call 0800 121 8034 or use its online complaints form.

However, you will be able to refer your complaint to the FOS if you are unhappy with the proposed resolution or eight weeks have passed and the issue has not been resolved.

Top tips for short-term borrowing

If you’re considering a short-term loan there are steps you should take to check if you can really afford it and what protection you have.

Always check the APR

APR stands for 'annual percentage rate', and is designed to show an annual cost of credit including interest and other charges.

Some of the Provident loans hit 1,557.7% APR (variable) which is very high. For example, if you took out a £100 loan at this rate, to be repaid over 13 weeks, the total amount you would repay would be £143.

Check the loan provider is registered

The loan provider should be registered with the FCA and this gives you greater protection if things go wrong

Check the Financial Services Register to ensure they are authorised or registered. It has information on firms and individuals that are, or have been, regulated by it.

Know your rights

If you want to complain about the service you have received or if the provider has charged you the wrong amount then complain.

If your lender doesn’t get back to you, you can complain to the FOS.

We have advice on how to take a complaint to the FOS.

Search for alternatives

There may be a cheaper way to borrow the money you need.

Check out our credit guides to see if one of these is more suitable for you. A 0% money transfer credit card allows you to ‘unlock’ the balance of the credit card into your current account and gives you a set period where you won’t have to pay any interest - but you will still have to pay back at least the minimum payment each month.

If you need to make a purchase, could you get a 0% interest-free credit card. This would allow you to make the purchase but not pay back any interest for a set period of time, but you will still need to make at least the minimum payment each month.

You may also be better off with a loan from a credit union. Loans from credit unions are generally cheaper than loans from most other providers for smaller amounts and do not incur set-up fees, administration costs or early redemption fees.

Many credit union loans, for example, will cost 1% a month on the reducing balance of a loan (an APR of 12.7%). This means that if you borrowed £1,000 repaid over one year, you would repay £1,067 in total.

Get a government loan

You may be able to get a Government budgeting loan which could help pay for furniture and household items, clothes or footwear, rent in advance, costs linked with moving house, maintenance to your home, travelling costs within the UK and funeral costs.

You can also use them to repay hire purchase loans or loans taken from the above items.

You could be eligible for one of these if you’ve been on certain benefits for six months and you only have to pay back the amount you borrow.

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a provider before committing to any financial products.