Philip Hinks represents Customer Advocate in scheme of arrangement affecting 4.2 million creditors

Philip Hinks acted for Jon Yorke (instructed by McCarthy Denning), the Independent Customer Advocate, in respect of the scheme of arrangement proposed by certain companies in the Provident group.

The Provident companies in question provided so-called ‘pay day loans’ to 4.2 million borrowers on low or moderate incomes.  The interest rates charged were very high.  A large number of borrowers have or may have redress claims against the Provident companies as a result of the failure by those companies to carry out requisite creditworthiness checks or to assess the suitability of the loans.  Such claims are typically small in value, ranging between £500 and £1,000.

Since April 2017, the Provident companies have paid in excess of £80m to settle such redress claims.  The anticipated level of future claims might well exceed £1 billion.

The central purpose of the scheme is to create and distribute a £50m compensation fund to borrowers in satisfaction of their redress claims against the relevant Provident companies.  On Provident’s current estimates, this would result in borrowers recovering not more than 6% of the value of their redress claims.  Without the scheme, it is Provident’s position that the relevant companies would be forced to enter an insolvency process, in which case borrowers would receive no return in respect of their claims.

The convening hearing took place before Sir Alastair Norris on 22 April 2021 (Re Provident SPV [2021] EWHC 1341 (Ch)) and, after creditors voted in favour of the scheme, the sanction hearing took place before Sir Anthony Mann on 30 July 2021 (Re Provident SPV [2021] EWHC 2217 (Ch)).  On each occasion, Philip represented the Customer Advocate, whose function was to report on various matters for the benefit of the borrowers, including whether Provident’s communications to borrowers adequately explained the key facets of the scheme.

The scheme received the Court’s sanction on 4 August 2021. The convening judgment is available here and the sanction judgment is available here.

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