Provident, the high cost lender, and their sister Company, Satsuma Loans, have given thousands of customers an early Christmas present and announced on the 31st December 2021, they will clear off all existing Loans ( see here for Provident; and here for Satsuma)
This will include both loans that are in arrears and those that are not.
The reason why the Firms have made this decision is because they have also decided to cease trading on that date.
Why are they writing off Debts?
The reason why both firms have made this announcement is also related to the fact both Firms recently have been experiencing difficulties, as increasingly they were being challenged by customers who believed that Loans they had been given were unaffordable.
Seventy-five per cent of these loans were found to be unaffordable when complaints were made to the Financial Ombudsman Service, leaving both Firms with debts of millions owed to their customers.
So, facing bankruptcy themselves, Provident applied for a Court Order for something called a Scheme of Arrangement and this was granted in June 2021, allowing them to limit how long people had to complain and also reduce the level of compensation that both Firms owed customers.
This meant going forward customers would only have a short window of opportunity to make a complaint that their loan had been unaffordable (until the end of February 2022) and after that they couldn’t make any further claims.
It also meant both Firms could limit how, much compensation they would pay to people to £50 million, meaning people who claimed were only likely to receive 5-10% of the compensation they were entitled do.
So now what happens is both Firms have said all balances owed to them will be cleared at the end of the year.
So Now what Happens?
Where you have never went into arrears and have maintained your balance, both have said you credit report will be updated to show your account has been settled.
Where you have gone into arrears, credit reports will be shown as partially settled and your balance reset to £0.
If you are still making payments to these Firms, both have said they will stop taking payments after the 31st December 2021.
Where any payments are made after these dates, they have said they will refund them.
What if your Debt has been Sold?
If you have an old debt that has been owed to Provident or Satsuma that has been sold onto a debt purchaser (Firms that buy debt), you will still owe the debt. Debt Purchasers are different from Debt Collectors. They own the debt, whereas Debt Collectors just collect it. So, if it is being collected by a Debt Collector it will be written off.
The problem is it is not always clear whether a debt has been sold or not, as some Firms both collect and buy debt, so you need to clarify with them in what capacity they are acting.
Where a debt has been bought, and, therefore, is still owed, it is important you claim under the Scheme of Arrangement (you have to the end if February 2022), as you may be entitled to compensation.
What Happens to the Scheme of Arrangement and any Claim you have?
For anyone who has not made a claim to the Scheme of Arrangement, you still can until the end of February. Equally anyone who has made a Claim, it will still be processed.
However, where a claim is successful, it will be offset again any debt that was still outstanding and has been written off.
This means if you owed £800 and this is written off on the 31st December 2021, if you subsequently are found to be owed £1,000 in compensation, then under the Scheme of Arrangement you would only be owed £50-100.
This would be offset against the debt you have had written off, so you won’t receive anything.
Where you loan has been paid off you will receive the full compensation you are allowed under the Scheme; or if the level of compensation is more than the debt that is being written off, you will receive the difference between the two.
If people still want to make a claim to the Scheme of Arrangement for Satsuma or Provident Loans, they have until the end of February 2022 to do so. The Scheme also covers Glo and Greenword Personal Loan customers.