Doorstep lender Provident Financial stung by huge fee for rescue rights issue. Clients will know how that feels

The company specialises in high cost credit to low income people who often lack any other option. The City thinks it should be set fair after the rescue package, especially with Brexit making people poorer, but the past of this business is a chequered one

The City thinks the worst is over for doorstep lender Provident Financial (Provident Financial)

There’s a certain poetic justice in the £31m in fees Provident Financial is shelling out to the advisors and underwriters who have helped it pull off a £331m rescue rights issue.

A provider of high cost credit to people of limited means, the company now knows how it feels to be on the receiving end.

Provident had to go cap in hand to the City because it needed the money, and it had to pay what the City asked. It's a situation that must have been all too familiar to many of its clients before the Financial Conduct Authority introduced a cap on charges.

​Not that its new management will be complaining too much about the outcome. The shares shot up by 70 per cent on the back of rights issue announcement. A stunner and a half that.

The reason is that the market thinks the worst is over, and it might be right.

Provvie had taken hits on multiple fronts, and was largely the author of its own misfortunes.

First off there was a straightforward cock up with the way it decided to run its business.

It centralised and computerised the diaries of the people who collected its loan repayments door to door, making full time staff of them in the process (and reducing their numbers).

Trouble is, appointment times were thrown up that weren't convenient for the collectors or the clients, making both cross. People quit the business in their droves leaving it badly short.

This is what happens when businesses forget the “human” part of “human resources”. I imagine that it is a story that will be regularly repeated over the next few years, albeit in different forms, even if this episode finds its way onto MBA syllabi, as it really ought to. Some bosses just can’t help themselves.

Just as serious, however, was a Financial Conduct Authority investigation into a PPI like insurance product sold alongside credit cards issued by Provvie's Vanquis bank. Customers will be refunded at a cost of around £170m plus a couple of million pounds worth of fine on the top of that. Another £20m has been set aside for a second probe into car financing business MoneyBarn.

What’s got investors excited after all that is that with the money banked the company can look forward to a better future. The uncertainty is over, and the damage Brexit is doing to Britain’s economy means that there are going to be more and more poor people around who can’t get credit from anyone else.

Before Provvie plunged into a self made disaster I opined that the conditions were in its favour and that it should do well. That hasn’t changed. It just requires bosses to restrain their worst impulses for it to take advantage. The City thinks the new lot will be able to do that, hence the excitement on the stock market.

The only thing that might spoil the party is the fact that scandal does seem to be endemic to the business Provident is in.