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Morses Club sees lending and cash collections start to recover, after April slump

Alternative lending group Morses Club saw new lending fall by more than 70% during April, and a drop of 20% in cash collections since then, according to a trading update published today (July 16).

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The results update for the four months to April 2020, shows that cash collections reduced by 19.8% in the run up to June, but the data is already showing signs of improvement. It also shows however that Morses, which predominantly lends on borrowers’ doorsteps, has seen a reduction of home collected credit (HCC) customers by 18.1%, from a total of 184,000 as at June last year.

 

While the trading update acknowledges that the high-cost credit sector faces “a number of headwinds”, which are expected to continue, the group has seen growth in demand for six and nine-month products within Shelby Finance, its digital division that recently had to write down loans, and an initial drop in its lending growth curve is starting to flatten.

 

The decline in lending started with a 72% reduction in April, before alleviating to a 50% decline in May and a 30% fall in June. Morses states that it anticipates this decline will continue to reduce in July.

 

While improving collection rates in recent weeks have been offset by a smaller loan book, Morses anticipates collection rates to approach pre-Covid levels by the end of August 2020.

 

After launching a remote lending product to existing, and then later new customers, Morses Club has seen 109,000 customers register for its online portal. The group has also made structural changes, and brought its property portfolio in line with employees’ support for working more flexibly. The lender hasn’t furlough any staff or taken on any other government assistance.

 

Paul Smith, chief executive of Morses Club, said: “We are encouraged by the improvement in credit issued and collections in HCC following the relaxation of the government’s Covid-19 restrictions over recent weeks and, in a sign of the improving trading environment, we are also pleased to see some customers who requested payment holidays now starting to make repayments once again.”

 

The headwinds alternative lenders will face this year, will be among the topics discussed at the Lending Summit in October. The Lending Summit will this year be a fully-digital and interactive broadcast event.

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