Provident push to bear fruit for lender Satsuma

Satsuma’s terms and conditions fall well within new FCA guidelines designed to protect customers from lenders that charge extortionate fees and interest.

Bradford-based Provident said that in order to maintain the group’s responsible approach to lending, Satsuma has no extra charges, weekly payments are fixed based on a predetermined schedule, customers have regular contact with a telephone agent and there are a number of procedures in place for people who get into financial difficulty.

Provident’s chief executive Peter Crook said: “There has been a lot of bad practice in payday loans. Satsuma is not a rollover product. It’s a great fit for customers. There are no penalties and our pricing is within the FCA cap.”

Provident has advertised Satsuma modestly on TV, radio and online, but Mr Crook said the firm will “put the foot on the gas” in terms of spending later this year and into next year.

The new FCA rules come into force in January.

Satsuma currently has just 11,000 customers, but its aspiration is to be a top three lender in the online instalment sector.

Mr Crook said this market is estimated to be four times bigger than Provident’s traditional home credit business.

He was speaking as Provident reported a 23 per cent leap in half-year profits to £94.1m after strong take up of its Vanquis credit card, which serves people who have been turned down by the high street banks.

As more and more transactions are carried out using plastic rather than cash or cheques this has become a very profitable part of the company.

“A credit card is essential in the modern world,” said Mr Crook. “Our customers have been excluded from mainstream credit. People need credit cards to buy budgets airline tickets and do online shopping.

“We allow inclusion for people who are not being served by the banks. People are using Vanquis to improve their credit history.”

The firm believes that around 80 per cent of its customers have seen an improvement in their credit rating.

Vanquis​’ profit jumped 37 ​per cent​ to £63.7m​ in the first half of 2014, making it the driving force of Provident’s business.

UK customer ​numbers grew by​ 17.3​ per cent to nearly 1.2 million and Mr Crook said there are seven to nine million potential UK customers who have been declined a credit card.

​“Two thirds of our customers have had credit problems. We’re giving them a second chance,” said Mr Crook.​

He said that a Vanquis trial in Poland​ ​is showing encouraging momentum. There was also a notable return to growth in the ​doorstep lending business despite the sluggish economy.

Customer numbers have been cut by 25 per cent to remove poor quality customers and this resulted in a 2.5 per cent increase in pre-tax profits to £37m.

“We’re moving to a leaner, higher quality business,” said Mr Crook.

The​ doorstep lending business ​took an exceptional charge of £4m in ​the first half​ relating to 225 proposed redundancies of back office and clerical staff, which was reported in June.

This will deliver full-year savings of £4m.

Blackfriar: Provident outmanoeuvres the payday sharks, Page 3