Provident - Non money saving tip of the week !

jamesd

And you may well find that loan declined. Or you'll find a computer mistake delaying payment of your other benefits for a week and costing you more than you can afford in bank charges... unless you can borrow enough from somewhere else - perhaps Provident - to pay your bills while that is sorted out.

The concept of the system works fine. It fails when it comes to delivering it as reliably as people right on the edge need it to be delivered. Should be reliable, but that's not the reality of living with it day to day. Not so bad if you have a credit card and can budget but that's not true for quite a lot of those in the system.

Morglin

They can serve a purpose for those without access to sensible banks charging sensible rates, but, as always, it's those who can least afford it that get clobbered by firms like Provident with their rates.:eek:

I know that taking the higher risk clients justifies the rates a litt,e but I think Provi and those like them really do take the rise.:mad:

Their agents are paid commission, so it makes sense that they will try to flog you what they can, although that applies to the mainstream lenders as well.

I've used Provi years ago when I was skint, but the moral is to use them to build a rating or when there's no other way, but then dump them as soon as there is a cheaper alternative.:p

I think the rise in Credit Unions will eventually make these places, that charge such exhorbitant rates, redundant anyway.:j

Meanwhile, "buyer beware".

carolwat

Morglin wrote:

Their agents are paid commission, so it makes sense that they will try to flog you what they can, although that applies to the mainstream lenders as well.

agents are not paid commission on what they 'flog' so how would that help us. we are paid commission on what we collect and if we have non quality customers with rates so high they cant afford to pay them or pay all of it then we are paid less. when will it sink in? it does not pay an agent to over stretch a customer, it in fact has the opposite effect.

Cumbrian_Male

Competition Commission Inquiry final report into Home Credit published today.

Link is to title and contents page as full report is a 219 page pdf file, which may take some time to open.

astonsmummy

I got a doorstep loan when my washing machine broke down, i payed back £6 a week, it was the only way of getting the money, i couldnt go to the laundrette, i dont even know where there is one round here.
I know they charge extorshinate rates but it was my only choice, i wasnt pressured into getting another loan either.

jamesd

Cumbrian Male, the really interesting bit there is that it effectively suggests in What is a fair rebate, paragraph 46 onwards, that consumers might fruitfully take legal action against Provident and other lenders when they have repaid early and only the statutory rebate is given:

"Overall, we concluded that the minimum ESRs specified in the ESR regulations ... give rise to rebates to customers that are low in comparison to cost-based levels."

And since according to the law "consumers should have an 'equitable reduction in the total cost of credit'", this could prove to be quite interesting, given consumer interest in action to recover unfair charges of various sorts. It even gives suggested values for the additional rebate that could be appropriate, a perfect recipe for successful court action.

Cumbrian_Male

It does pose an interesting question, especially with all lenders who apply the minimum rebate.

I know from experience that the 2004 ESR regulations substantially improved the rebates paid out as our products are traditionally short term. The rebates that were generated under the Rule of 78 were in my opinion disgraceful.

In the OFT findings in this inquiry, the crux of the arguement rests on the legal definition of "fair".

The OFT didn't think it fair that an agents commission on the settlement payment be considered a business cost, the company do consider it a cost as we have to pay the agent the commission inrespective of whether the are paid the settlement in cash to the agent or the customer posts in a cheque to the office.

This would need a test case to decide. I think if the OFT believed they could prove it beyond doubt they would have enforced a harsher ruling, hence the option to settle for a midway point between cost-based and legal minimum.

James how is your knowledge on European employment law?

As the Hungarian regulator PSZAF ruled that Provident agents had to be employed and not self employed, could any EU legislation be used in the UK to force the same rights here? If so then there would be a substantial problem for all home credit businesses in the UK.

All views expressed are my own and not those of my employer.

nomoneytoday

carolwat wrote:

oh they ensure people can afford to repay their loans do they. please explain to me then why i get loan offers everyday that have been cleared already and just need me to sign on the line and the money will be in my account within hours. i certainly cant afford to repay what they are offering. the only money i have goin in my account it from child benefit and tax credits. i get paid in cash and the bank have no idea of my earnings. all they see if that my account is in credit and i pay my bills. is this what you call responsible lending. perhaps i will take then up on their offer as they are preying on me at a time of year i am vulnerable and have the expense of christmas. then whan i cant make the payment i can come on here and tell you all how evil they were making me get the money from them.

now get off your high horses about the likes of provident and get in the real world. businesses are all trying to make money, that is the nature of the game. if you are daft enough to believe the banks have your best interests at heart then more fool you. i as a provident agent do have the best interests of my customers at heart otherwise i would end up losing out with my commission pay based on collections when they cant pay.

carol

I didn't say the mainstream lenders were perfect. If they make a loan incorrectly, the bank and their shareholders lose out.
By being more selective they can offer loans at lower interest rates.

PF don't do that badly though. Their figures are at http://www.providentfinancial.com/plc/DocumentLibrary/Investors/KeyStats/060911%20Key%20stats%20half%20year%20FINAL.xls

jamesd

Cumbrian_Male wrote:

The rebates that were generated under the Rule of 78 were in my opinion disgraceful.

Given the high interest rates and fixed time periods - in months rather than amounts or percentages - I agree with the CC that the current rules provide too little rebate for this market. Particularly for that really finely tweaked just over a year loan term so two months instead of one can be taken.

Cumbrian_Male wrote:

The OFT didn't think it fair that an agents commission on the settlement payment be considered a business cost, the company do consider it a cost as we have to pay the agent the commission inrespective of whether the are paid the settlement in cash to the agent or the customer posts in a cheque to the office.

There are really two cases: the straight repayment and the refinance with additional lending. Here Provident seems to completely destroy its case if it pays the same commission to the agent in both cases. It's fine to reward the agent for collecting all of the money due and eliminating the future default risk, but that needs to be reduced to reflect the eliminated cost of collection for the agent and I don't know if it is reduced. But then there's the refinance and there the risk of default remains and exposure is actually higher (though offset by past regular repayments), so a far lower commission seems appropriate because the agent will be getting the increased return on the new loan.

Some commission to encourage early repayment and pay the agent for the costs involved does seem reasonable, but I can't see any reasoning that could justify it if the rates were the same for these two cases.

Cumbrian_Male wrote:

This would need a test case to decide. I think if the OFT believed they could prove it beyond doubt they would have enforced a harsher ruling, hence the option to settle for a midway point between cost-based and legal minimum.

I have a feeling that this ruling may actually have rather greater effects than it seems: the credit record disclosure may open up other credit avenues and what is in the current climate equivalent to a frank invitation to take legal action could well prove very interesting.

Cumbrian_Male wrote:

As the Hungarian regulator PSZAF ruled that Provident agents had to be employed and not self employed, could any EU legislation be used in the UK to force the same rights here? If so then there would be a substantial problem for all home credit businesses in the UK.

I'm not very familiar with it. It does appear to be a risk, since the EU legislation is presumably identical. For consumers it might be a good thing, since it would presumably make it clear that the cost of collection is a fixed rate component depending on the number of collections involved.

Beatrix_Kiddo

I used Provident a couple of times about 10 years ago, when I was a student nurse and couldn't get credit.

I knew at the time that it was an expensive way of borrowing, but for me then, it was the only way of borrowing. I had to borrow a few hundred to buy all second hand stuff for my bedsit (cooker, washing machine, fridge, bed, sofa, pots, crockery, chest of drawers etc etc).

At the time, I was grateful, and even now I still am, because it enabled me to get on my feet. I remember feeling quite ashamed that it was the only way I could get money (didn't understand then that having no history means you can't get credit!), but on reflection, I am proud of the fact that I did what I could at the time, and that it worked for me.

Thank you Provident, and lucky anyone who has never had to be in that position.