Loans watchdog: My sadness over the demise of Provident Financial’s doorstep lending business
- FCA’s Sheldon Mills ‘personally benefited from home-collected credit’
- But he defended the FCA after accusations it was driving firms out of the market
Britain’s top loans watchdog has admitted he is ‘disappointed’ that the doorstep lending market is shrinking after Provident Financial said it was closing its business after 141 years.
Sheldon Mills, executive director of consumers and competition at the Financial Conduct Authority, told The Mail on Sunday that he knew the value of doorstep lending because he ‘personally benefited from home-collected credit’.
However, he defended the regulator after the boss of Morses Club – the second-largest doorstep lender after Provident – alleged last week that the FCA was driving firms out of the market and inadvertently sending borrowers into the arms of illegal loan sharks.
Sheldon Mills, executive director of consumers and competition at the FCA, said he ‘personally benefited from home-collected credit’
Mills said: ‘My grandmother used home-collected credit, that’s how we lived. So personally, I absolutely see and understand the need for this market. It’s quite clear that the major banks do not participate for certain customers, so there is a need for firms which operate in this market.’
But he added: ‘Lending needs to be affordable. Quite a lot of our research has shown that some providers of high-cost, short-term credit have based their services on gaining lots of customers and then relending to them multiple times, and that’s led those customers into unaffordable debt.’
His comments come after The Mail on Sunday revealed last month that Provident was closing its doorstep lending business, where lenders turn up at borrowers’ homes to collect repayments on high-interest, short-term loans.
The rise of claims management firms submitting thousands of compensation claims for mis-selling was blamed for making ‘the Provvy’ unable to make a viable profit.
Amigo Loans, which makes loans that require the signature of a guarantor, has also warned it faces insolvency after a compensation scheme for mis-selling victims was rejected last week by the courts.
On the brink: Amigo Loans has warned it faces insolvency
Morses Club boss Paul Smith, whose parents relied on Provident to pay for his school clothes and other necessities, warned that the exit of major doorstep lenders could push borrowers into the arms of loan sharks.
But Mills hit back: ‘We haven’t seen any major increase in our detection of illegal money lending. The provision of products has shrunk a bit. We will know more at the end of the pandemic about precisely what’s happening because people’s reliance on credit has changed.
‘In terms of where people can go, there are multiple providers still in the market for high-cost, short-term credit. And there are 420 credit unions offering loans with interest capped at 42.6 per cent.’