High Court sanctions Provident scheme of arrangement

The scheme, which won “strong creditor approval” at the sub-prime lender, is expected to become binding today (5 August) and will be implemented towards the end of August. The deadline for submission of claims, therefore, is expected to be towards the end of February 2022 - with it anticipated that all payments to creditors would have been made towards the end of 2022.

According to the BBC, the scheme will cover customers who had unaffordable loans between 6 April 2007 and 17 December 2020 from one of the firm’s personal credit brands, with some 4.2 million people borrowing money during this period. However not all are expected to have a valid claim, with the High Court estimating that up to 30% could apply for redress.

Commenting on the news, Provident Financial’s chief executive Malcolm Le May said: “The court has approved the sanctioning of CCD’s scheme, which is a positive outcome for CCD’s customers with valid claims under the scheme, as it provides access to a redress payment which would not have been possible had the scheme not been approved.

“We believed from the outset that the scheme was fair and that it offered the best outcomes for customers. The court sanction enables us to move forward with the scheme and we expect that creditors will receive redress payments in the second half of 2022.

“As we have stated previously, the managed run-off of the CCD business is progressing well and we will provide the market with a further update as to how the group is positioned for the remainder of 2021 and beyond with our interim results on 11 August 2021.”

Regulator the Financial Conduct Authority (FCA) - which prior to this decision published two letters of concerns regarding the CCD - has said it continues to not support the scheme for a number of reasons. Its key concern is that consumers are being offered significantly less than the full amount of redress they’re owed.

It shared its initial views to the court at the convening hearing on 22 April 2021 - with Provident subsequently making changes to its proposal, including deciding to wind down Provident Personal Credit (PPC).

Despite its concerns, the FCA was conscious that the only likely alternative to the scheme was the insolvency of PPC - with consumers unlikely to receive redress in that scenario. This was an important factor in the FCA’s decision to not formally oppose the scheme in court.

The regulator does still have significant concerns about the scheme and plans to consult on its approach to this in the autumn, with the firm remaining under investigation for its conduct.