Morses Club sees shares dive as it pursues scheme of arrangement

Morses Club shares dive 40% as doorstep lender’s future hangs in the balance with latest plan to address rising claims

  • Morses Club saw its share price slump by over 40% today
  • Doorstep lender revealed it plans to pursue a scheme of arrangement  

Morses Club is to enter a ‘potential scheme of arrangement’ to address customer compensation claims that ‘could jeopardise the group’s future’.

The doorstep subprime lender said a central objective of the potential scheme, which has been identified to the Financial Conduct Authority, would be to treat all customers equitably and ‘settle eligible redress claims’ arising from customer complaints over a defined period.

Morses Club shares fell sharply in the wake of the announcement, and were down 42.40 per cent or 3.60p to 4.89p by midday, having fallen over 90 per cent in the past year.

Update: Morses Club revealed it plans to enter a ‘potential scheme of arrangement’

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

The Nottingham-based AIM-listed group flagged an increase in customer complaints only last month, which caused its shares to fall.

The group said in a stock market statement: ‘Whilst the directors consider that Morses Club has adequate liquidity for the immediate future, they believe that without a potential scheme, the level of redress claims could jeopardise the group’s future. 

‘Morses Club will continue to explore alternative options to a Scheme but it is likely the alternative options would result in those with Redress Claims receiving considerably lower amounts than they would under the Scheme.’

It added: ‘Details of any potential scheme would be announced in due course. The scheme would be subject to the approval of the requisite majority of affected customers (i.e. those customers who received loans during the period to be covered by any scheme) and, thereafter, the court.’

For the year to 25 February 2023, which is a ‘transition year in which legacy issues can be largely resolved’, the group does not expect to make a profit.

But, looking further ahead, the company said market conditions were favourable, due to the exit of other significant competitors and the impact of the current economic situation in the UK on customer demand. 

The group said: ‘The Board is confident that the Group can return to profitability during FY24.’

Gary Marshall, chief executive of Morses Club, added: ‘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. 

‘A successful Scheme of Arrangement would provide more certainty to the total liability arising from customer complaints and ensure that we can reshape the business for the future. 

Aware: Morses Club has provided the FCA with its proposals and is engaging with them regarding a potential Scheme

Aware: Morses Club has provided the FCA with its proposals and is engaging with them regarding a potential Scheme

‘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.’

In March 2020 sub-prime lender Amigo Loans was forced to pause lending after a deluge of complaints from people who accused the firm of selling them loans that they could not repay. 

But, in May its ongoing dispute over compensation for mis-sold borrowers was resolved and its latest business redress scheme was finally approved at a High Court hearing. 

This emerged amid a crackdown on non-standard finance providers by the UK regulator, which saw the number of such providers diminish and big names like Wonga going bust.