From his 2003 report on Provident Financial:
Provident Financial plc appears to have charged average APRs on its
loan of in excess of 200% over a period of 6 years and at present
charges about 185% APR on such loans.
2. Provident Financial plc appeared to charge an interest rate exclusive of
charges of in excess of 100% per annum during this period.
3. Despite a falling trend in its average APR over this period, caused
largely by lengthening the life and size of its average loan, Provident
Financial plc increased the average revenue it earned for each £1 it
advanced from 47.7p to 52.6p over the period 1996 to 2002.
4. Provident Financial plc has managed its affairs to appear to be a
normal provider of loan finance for the purposes of stock market
review, and that market has capitalised its extraordinary ability to make
income of 77% of average loan balances outstanding in a year when
compared with 6.9% for Lloyds TSB Group plc, for example. The result
is that the market values each of them similarly. This will result in
substantial stock market pressure against change in the trading
environment in which Provident Financial plc operates.
The financial markets have welcomed the ability of Provident
Financial plc to produce financial results that appear, on profit
and loss indicators, to match those of other companies in the
sector, albeit that it is clear that on balance sheet ratios it is
aberrational. They are likely to resist changes to the business
model that creates this result without compulsion.
They charge very high interest rates plus charges.
Their return on capital appears to be about the same as other financial companies.
Every economist in the universe then says, well, must be an expensive thing to do then, lend small amounts for short periods of time, if there are no excess profits despite the interest charges.
Spudda doesn’t get this.