CEO of subprime lender Morses Club quits amid surge in customer complaints
The CEO of home loan company Morses Club has resigned after the company announced a drop in expected profits following an increase in customer complaints.
Paul Smith, CEO since 2015, is stepping down from the board effective immediately. Current COO Gary Marshall is to take his place, pending regulatory approval.
Filings show Smith unloaded a significant portion of his stock in Morses last Friday. The company said it had “no prior notice” of the sale, which is worth around £194,000.
In the same statement, Morses Club said profits for the current year are expected to be 20-30% below expectations following increased costs associated with processing compensation claims.
Morses blamed a “rapid” increase in the volume of claims submitted recently. Claims are made in batches by companies on behalf of customers who claim they have been treated unfairly.
Broker Peel Hunt said: “We are placing our forecast, target price and recommendations under review.”
Shares of the Nottingham-based company fell 57% in early trading.
Morses offers people one-year loans of up to £1,000 at an annual interest rate of just under 500%.
The announcement comes amid a crackdown by the Financial Conduct Authority on subprime lenders who fail to treat customers fairly.
In January, the FCA issued warnings against companies using insolvency law to limit their compensation obligations to customers, promising to sue any company that failed to set aside enough funds to meet to complaints.
Last year, a court threw out a scheme set up by payday loan company Amigo after the FCA said it was unfair to customers. Subprime lender Provident announced it was closing its payday lending arm, Provident Personal Credit, after the FCA objected to a scheme under which it said consumers were being “offered significantly less than the amount total reparation due to them”.