UK Non-Prime Consumer Credit Market Insight Report 2023
Includes sub-prime and near-prime credit
About the report
Our review of the non-prime, or high-interest, consumer credit market describes the market for consumer credit agreements with average fixed interest rates over 30% per year, and profiles the main lenders involved in it. It includes:
– Review of each of the segments in the market (see below)
– Discussion of key segment issues including the impact of regulation, and sets out our estimates of historical and forecast growth for each.
– A set of 35 lender profiles of those active in the sector, covering financial performance, ownership, loan products offered, market positioning, corporate activity and history of the lender.
We cover the following segments and lenders operating within them:
– Guarantor finance (key providers include Amigo Loans (to close), Non-Standard Finance’s Trust Two and George Banco brands (both in run-off) and Guarantormyloan.co.uk
– High cost short term credit (following the exit of the majority of the largest firms, key providers include Gain Credit and PDL Finance)
– Home-collected credit (following Provident’s decision to leave the market, key providers include Morses Club and Non-Standard Finance (in run-off))
– Instalment credit (key providers include Non-Standard Finance’s Everyday Loans, Madison CF’s 118118 loans, Oakbrook Finance, Bamboo and Oplo)
– Motor finance (key providers include S&U plc’s Advantage, Provident’s Moneybarn, First Response and Startline)
– Sub-prime credit card and other revolving loans (key providers include CapitalOne, NewDay and Provident’s Vanquis)
– Pawnbroking (key providers include H&T Group and Ramsdens Financial)
– Logbook loans (key providers include CarCashPoint)
– Rent-to-own (key providers include Mutual Clothing and Supply )
Many of the leading providers and their investors are now involved in more than one segment
We estimate total loan receivables across the market to have been just over £10bn at the end of 2021, up around 6% from 2020, but still slightly below 2019 levels.
- Average loan durations vary by segment from under 3 months to 30 months.
- Loan impairment levels vary by segment from 10% to 35% of gross loans.
- Average interest rates vary by segment from 30% fixed to 260% fixed
Key market events include:
- The closure of most leading firms in the guarantor loans, home credit, HCSTC and Rent-to-own segments over the last five years, culminating in the announced closure of Amigo Loans in March 2023.
- Regulation: Despite there being clear potential for these segments to offer real value for consumers, we believe that there is now significant doubt regarding the feasibility of new lenders being launched with confidence of meeting all relevant regulation.
- Ongoing tightening of underwriting rules by mainstream lenders, leading to ongoing demand for the remaining core products in the non-prime sector, including instalment loans, motor finance and credit cards.
The macroeconomic picture supports ongoing demand for non-prime credit:
The Office of Budget Responsibility expects 2022-23 to see the biggest fall in real household disposable income – which it regards as a good proxy for standard of living – since records began over 50 years ago.
Forecasts are for unemployment to remain at similar levels with significant under-employment (those in work who want to work more hours than they currently do).
After a significant increase this year, real wages are expected to be flat for the next two years followed by much more modest increases.
However the market is largely constrained by supply.
Market growth primarily depends on the decisions of current lenders, potential new entrants and their respective investors regarding their willingness to set up / expand operations and enter new areas.
Financial Conduct Authority regulation of consumer credit, together with Financial Ombudsman judgements based on compliance with FCA rules, remains a key constraint.
Our market forecast scenario envisages instalment loans and motor finance to account for most of the overall growth in the non-prime market with some recovery in other segments including guarantor and rent-to-own.
Our expectations for individual segments are set out within the report.
There is significant potential for faster market growth should existing or future lenders decide to make larger investments than we envisage.
Other factors which have influenced the growth of the market, and which are analysed in the report, include:
1. Overall economic performance influences the appetite of consumers for borrowing and also their ability to repay loans they take out
2. Demand for non-prime credit is likely to follow a similar trend to that of overall consumer borrowing with many non-prime borrowers seeking to borrow for reasons similar to those of mainstream borrowers and availability of finance for both being subject to similar influences.
3. Levels of unemployment and underemployment affect the number of people who are in a position to obtain both non-prime and mainstream credit. Also, increases in unemployment are a major cause of repayment problems
4. Trends in earnings from wages and benefits show that, while wages have grown in recent years, the government’s austerity agenda has led to significant working-age benefit cuts and that debt levels are high relative to earnings
5. Other workforce trends such as self-employment – which has grown – and trade union membership – which has steadily fallen – show an increase in the precariousness of the labour force and a weakening of the ability of organised labour to increase wages
6. Trends in housing costs and affordability show that levels are high and have continued to increase relative to earnings
7. Reduction in the number of bank branches and credit cards in circulation give some indication of reduced access to mainstream finance. Another comes from ‘thin’ credit files – where potentially creditworthy borrowers lack a credit history on which to base lending decisions
8. Personal insolvency levels remain high by historical standards with numbers of formal solutions being once more on the increase
9. Rises in other measures of poverty such as food bank usage and rough sleeping levels confirm that the numbers in extreme poverty – who are likely to struggle to repay loans – are increasing
10. Motor industry and car finance trends – for the non-prime motor finance segment
Who is the report intended for?
Operators of of non-prime businesses themselves
Investors in these businesses
Retailers
Market regulators and policymakers
Banks, analysts, consultants and other parties with interests in the sector
What are the sources and methodology?
Interviews with senior-level contacts in the consumer credit industry
In-depth analysis of the macroeconomic environment and relevant market drivers
Financial analysis of the accounts of companies in the industry
Information from these sources has been synthesised and presented clearly and concisely with extensive use of charts and tables to illuminate points and support conclusions
Market forecasts have been constructed using simple assumptions which are clearly stated. Supporting evidence is provided for our assumptions but readers can flex them where required to model alternative scenarios.
Who was the report written by?
Frank Proud
- Frank founded Apex Insight in 2012 and set up our Consumer Credit practice
- His background is strategy consulting, with two firms, Bridgewater and Burlington, which were originally founded by ex-Bain teams.
- Subsequently, he was a senior member of the Transaction Support team at EY, advising private equity firms and corporate acquirers on commercial due diligence and other acquisition-related issues.
- He leads Apex Insight’s consulting work for investors and clients in the industry
- He has an MA in Economics from Cambridge University.
Julian Rose
- Julian is a specialist in the regulation of asset finance markets including business leasing and consumer credit.
- From 2008 to 2014 Julian was Head of Asset Finance at the Finance & Leasing Association.
- His previous experience spans regulation with the Financial Reporting Council and Competition Commission (now the Competition and Markets Authority), management consulting with PwC and KPMG, and industry with NCR and UPS.
- He is a Chartered Management Accountant and has Masters Degrees in Management from Boston University and Competition and Regulation from the University of East Anglia
Introduction 1
Market background 5
Market size and growth 5
Outlook for the market 6
About Apex Insight 7
Company background 7
Consulting services 7
Commercial / operational due diligence 7
Custom market analysis 7
Primary research 7
Growth strategy 7
Related research 7
About Apex Insight: example consumer credit / financial research and consulting clients 8
Contents 9
List of charts and tables 14
Non-prime consumer credit market 16
Definition 16
Number of non-prime consumers 17
Non-prime consumer credit market segments 18
Market size by Revenue 18
Market size by book size 19
Market size by new lending 19
Source: Apex Insight analysis Market growth 19
Non-prime consumer credit segments 21
1. Guarantor Finance 21
Definition 21
Key players 21
Sector size 21
Sector trends 21
2. High Cost Short Term Credit (HCSTC) 22
Definition 22
Key players 22
Sector size and trends 22
Insight: Price cap makes traditional payday loans unprofitable 22
3. Home-collected Credit 24
Definition 24
Key players 24
Sector size 24
Sector trends 24
Source: Apex Insight analysis 24
4. Instalment Credit 25
Definition 25
Key players 25
Sector size 25
Sector trends 25
5. Motor finance 26
Definition 26
Significant players 26
Sector size and trends 26
Sector trends 26
6. Credit cards and other revolving Loans 27
Definition 27
Key players 27
Sector size 27
Sector trends 27
7. Pawnbroking 28
Definition 28
Significant players 28
Sector size 28
Sector trends 28
8. Logbook loans 29
Definition 29
Significant players 29
Sector size 29
Sector trends 29
9. Rent-to-own 30
Definition 30
Significant players 30
Sector size 30
Sector trends 30
Insight: Non-prime finance departs from the high street 31
Alternatives 32
Credit unions 32
Community Development Finance Institutions 32
Fintech solutions 32
Government alternatives 32
Unauthorised lenders 33
Effect of the COVID-19 pandemic 34
Drivers of Non-Prime Credit Usage 35
1. Economic growth 36
3. Unemployment and underemployment 37
4. Wage growth and the impact of benefit policies 39
5. Levels of self-employment and trade union membership 40
6. Housing costs 42
7. Access to mainstream finance 43
8. Personal insolvency and bankruptcy 44
9. Other poverty indicators: food bank usage and rough sleeping 45
10. Motor industry and car finance trends 46
Used car sales volume forecasts 46
New car sales volume 46
Our forecast scenario for used car sales volumes 46
Motor finance penetration 47
Regulatory impacts 47
Other drivers of finance penetration 48
Used car finance penetration levels 48
Forecast used car finance values 49
Non-Prime Credit Regulation 51
FCA regulation 51
Affordability and other regulation is key to the market 52
Outlook for the market and our forecast scenario 54
Guarantor finance 56
High Cost Short Term Credit (HCSTC) 56
Home-collected credit 56
Instalment credit 56
Motor finance 56
Sub-prime credit card and other revolving loans 56
Pawnbroking 56
Logbook loans 57
Rent-to-own 57
Major lenders (loan books >£30m) 58
Advantage Finance 58
Ownership 58
Corporate activity 58
Products 58
Recent information 58
Amigo Loans 59
Ownership 59
Corporate activity 59
Products 59
Recent information 59
Bamboo 60
Ownership 60
Corporate activity 60
Products 60
Billing Finance 61
Ownership 61
Corporate activity 61
Products 61
Other information 61
Capital One 62
Ownership 62
Other information 62
Evolution Money Group 63
Ownership 63
Corporate activity 63
Products 63
Other information 63
First Response 64
Ownership 64
Corporate activity 64
Products 64
Other information 64
Gain Credit 65
Ownership 65
Products 65
Other information 65
Go Car Credit 66
Ownership 66
Corporate activity 66
Products 66
H & T Group PLC (Harvey & Thompson) 67
Ownership 67
Corporate activity 67
Products 67
Other information 67
Indigo Michael (Safety Net Credit) (In administration) 68
Ownership 68
Corporate activity 68
Products 68
Madison CF UK (118 118 Money) 69
Ownership 69
Corporate activity 69
Morses Club 70
Ownership 70
Corporate activity 70
Products 70
Other information 70
Mutual 71
Ownership 71
Corporate activity 71
Products 71
Other information 71
NewDay 72
Ownership 72
Corporate activity 72
Products 72
Other information 72
Ownership 73
Corporate activity 73
Products 73
Other information 73
Norfolk Capital 74
Ownership 74
Corporate activity 74
Products 74
Other information 74
Oakbrook Finance 75
Ownership 75
Corporate activity 75
Products 75
Perfect Home (previously Temple Finance) (In administration) 76
Ownership 76
Corporate activity 76
Products 76
Other information 76
Provident (Vanquis Banking Group) 77
Ownership 77
Corporate activity 77
Products 77
Other information 77
Specialist Motor Finance 78
Ownership 78
Corporate activity 78
Products 78
Other information 78
Tandem (Oplo 1st Stop) 79
Ownership 79
Corporate activity 79
Other lenders (loan books up to £30m) 80
1 Plus 1 80
Avant Credit 80
BETR Technology (Koyo loans) 81
Chetwood Financial 81
Greenlight Credit 82
Mallard Leasing 82
Marsh 83
Match the Cash Limited 83
Money in Minutes 84
PDL Finance 84
Premium Plan 85
Ramsdens Financial 85
SBTP Group 86
Western Circle 87
Appendix: abbreviations 88
List of charts and tables
Non-prime net receivables by sector 2021 (£ million) 5
Revenue by non-prime segment 2021 (£m) 19
Net receivables by non-prime segment 2021 (£m) 20
New lending by non-prime segment 2021 (£m) 20
Non-prime receivables trend by sector 2018-2021 21
Non-prime receivables growth (2018-2021 CAGR %) 21
Guarantor Finance sector key data for year to December 2021 (estimates) 22
HCSTC new lending value (£ billion) 23
HCSTC Finance sector key data December 2021 (estimates) 23
Summary of profitability of HCSTC loans 24
Home collected credit sector key data December 2021 (estimates) £m 25
Instalment credit sector key data December 2021 (estimates) 26
Motor finance sector key data December 2021 (estimates) 27
Credit cards and other revolving loans sector key data December 2021 (estimates) 28
Pawnbroking key data December 2021 (estimates) 29
Logbook loans key data December 2021 (estimates) 30
Rent-to-own key data December 2021 (estimates) 31
Number of high street stores offering non-prime consumer credit 32
UK real GDP / % annual changes 37
UK self-employed workers / ‘000 41
UK Trade union membership as % of those in employment 42
Ratio of median house price to median gross annual residence-based earnings (England and Wales) 43
Number of UK bank branches 44
Number of credit cards in issue / m, end of year 44
Food bank usage/ ‘000 parcels distributed by Trussell Trust 46
Rough sleeping – England 47
Historical and forecast car sales – volume / m 48
Historical and forecast used car finance penetration by volume / % 49
Historical and forecast used vehicle finance - volume ‘000 50
Historical and forecast used vehicle finance value - £ billion 50
Historical and forecast used car finance penetration by value / % 51
Key FCA regulatory requirements relevant to Non-Prime Consumer Credit 52
Historical and forecast new non-prime lending by segment: sub-prime credit cards vs other types / £m 56
Historical and forecast new lending by segment excluding sub-prime credit cards/ £m 56
Advantage Finance Limited Financials 59
Advantage Finance Limited Receivables 59
Amigo Loans Limited Summary Financials 60
Amigo Management Services Ltd Receivables 60
Bamboo Limited Summary Financials 61
Bamboo Limited Loan Receivables 61
Billing Finance Limited Summary Financials 62
Billing Finance Loan Receivables 62
Capital One (Europe) PLC Summary Financials 63
Capital One (Europe) PLC Loan Receivables 63
Evolution Money Group Summary Financials 64
Evolution Money Group Loan Receivables 64
First Response Finance Limited Summary Financials 65
Gain Credit LLC Summary Financials 66
Gain Credit LLC Loan Receivables 66
Go Car Credit Limited Summary Financials 67
Go Car Credit Limited Loan Receivables 67
H&T Group Summary Financials 68
H&T Group PLC Loan Receivables 68
Indigo Michael Limited Summary Financials 69
Indigo Michael Limited Loan Receivables 69
Madison CF UK Limited Summary Financials 70
Madison CF UK Limited Loan Receivables 70
Morses Club plc Summary Financials 71
Morses Club plc Loan Receivables 71
Mutual Clothing and Supply Company Limited Loan Receivables £m 72
NewDay Group Limited UK Summary Financials 73
NewDay Group UK Limited Loan Receivables £m 73
Non-Standard Finance plc Summary Financials 74
Non-Standard Finance Loan Receivables 74
UK Credit Ltd, Automoney Ltd, Mobile Money Limited Summary Financials 75
UK Credit Ltd, Automoney Ltd, Mobile Money Limited Limited Loan Receivables 75
Oakbrook Finance Limited Summary Financials 76
Oakbrook Finance Loan Receivables 76
Temple Finance Limited Loan Receivables £m 77
Provident Financial Group PLC Summary Financials 78
Provident Financial Group PLC Loan Receivables £m 78
Specialist Motor Finance Limited Summary Financials 79
Specialist Motor Finance Loan Receivables 79
Oplo CF and Oplo PF Financials 80
1st Stop Receivables (excluding home loans) 80
