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.
Moneybarn has improved the manner it deals with “future loan terminations”, according to Provident.
“The Company will work collaboratively with the FCA to investigate the remaining concerns and resolve any outstanding related issues as soon as practicable,” added Provident.
Provident has had a torrid year, marked by two profit warnings and the departure of its chief executive.
Shares have lost over 70% over the past 12 months.