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Morses Club shares dip 40% on scheme to address customer claims

Morses Club has flagged its plans for a potential customer compensation scheme to the FCA  (REUTERS)
Morses Club has flagged its plans for a potential customer compensation scheme to the FCA (REUTERS)

Doorstep sub-prime lender Morses Club’s shares fell 40% in early trading this morning  as it announced it was to enter a “potential scheme of arrangement” to address customer compensation claims that “could jeopardise the group’s future”.

It said that a key objective of the potential scheme that has been identified to the regulator the Financial Conduct Authority (FCA) would be to treat all customers equitably and “settle eligible redress claims” arising from customer complaints over a defined period.

It is understood that an additional sum estimated to be £45 million is expected to be set aside in its accounts for the 2022 financial year as an exceptional item to address those potential claims.

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The Nottingham-based AIM-listed company flagged an increase in customer complaints only last month that caused its shares to dip by 20%.

Insisting that it had “adequate liquidity for the immediate future” Morses Club and that it would offer “fair settlement” for eligible customers that had made legitimate complaints about the lender’s service.

The lender said it would explore alternative options to the scheme but that it was unlikely the alternative options would result in those with redress claims receiving considerably lower amounts than they would under the proposed scheme of arrangement.

Two years ago Morses Club had to suspend some of its online accounts that were tied into scandal laden financial services firm Wirecard. The business was the card issuer and banking partner for a digital arm of the lender called U Account.

In February, the former CEO of the group Paul Smith stepped down with immediate effect. He had been boss of the lender since 2015.

Boss of Morses Club Gary Marshall said: “As the UK’s leading home collected credit provider, we provide a valuable service to thousands of our customers who are unable to access mainstream credit providers and are likely to need even more support given the current economic climate.

“The potential Scheme is intended to provide a fair settlement for all eligible customers, whilst securing the Company’s future and enabling us to continue to provide access to credit for an underserved and growing demographic.”

Morses Club will publish its annual results on 18 August.