Shares in Provident Financial plunged 15% on Tuesday after the Financial Conduct Authority (FCA) put the subprime lender under investigation.
The FCA is investigating Provident Financial’s car financing division, and how it determines the affordability of loans.
“Provident Financial has been informed that the FCA has commenced an investigation into Moneybarn in relation to the processes applied to customer affordability assessments for vehicle finance and the treatment of customers in financial difficulties,” said the company in a statement.
The probe comes amid growing unease about lax credit standards across the car finance sector and calls for the regulator to tighten the rules.
Provident claimed it had already made “a number of process improvements” at its finance unit Moneybarn following discussions with the FCA.