Investors slammed the door on Provident Financial yesterday, sending its shares down by more than 10 per cent, after it warned that its sub-prime vehicle loans business was being investigated by the Financial Conduct Authority.
The Financial Conduct Authority (FCA) will focus on how Moneybarn decides whether applicants can really afford its loans, and on how it treats customers who fall into financial difficulty.
The investigation is more bad news for the troubled company, which lost more than 74% of its value in August after cutting its dividend, issuing a profit warning, announcing the resignation of its CEO, and announcing that the FCA was investigating repayment plans offered on its Vanquis credit card.
The lender's shares fell almost 16 per cent on the new probe, capping a brutal year which has seen it issue profit warnings and announce the death of executive chairman Manjit Wolstenholme.
Provident said yesterday: "The company will work collaboratively with the FCA to investigate the remaining concerns and resolve any outstanding related issues".
The FCA authorised Moneybarn to conduct consumer credit activities past year, but since then it has encouraged it to make a number of improvements, including to the way it deals with future loan terminations. That prompted chief executive Peter Crook to resign.
Moneybarn is controlled by Provident financial Group, which issued a statement on the investigation.
Neil Wilson, a market analyst at ETX Capital, said Moneybarn only has around 50,000 customers compared with more than 2m across the whole group.
The investigation comes at a hard time for the lender. The real question is whether it can get its core doorstep lending business back in shape.
Earlier this year it announced changes to its 130-year-old business model of sending self-employed sales agents door to door, offering loans and collecting debts, in favour of making greater use of technology.