UPDATE 2-Provident seeks to save home credit business with bulk complaint settlement

* Provident says home credit business under investigation

* Company lays out 50 mln pound complaint settlement plan

* Shares plunge 25% (Adds background on the company, updates share move)

March 15 (Reuters) - Provident Financial on Monday outlined a 50 million pound ($69.7 million) plan to settle a jump in complaints and claims against its door-to-door lending business during the COVID-19 crisis, warning the unit could collapse if it is not approved.

Shares had plummeted 29% to 1.86 pounds by 0830 GMT on Monday, and were set for their biggest one-day drop in nearly four years.

Provident, which lends to people who do not meet the lending criteria of mainstream banks, said Britain’s Financial Conduct Authority was investigating conduct issues concerning its Consumer Credit Division (CCD) over the past year.

The update is a major setback for the company, which was plunged into a crisis in 2017 when it undertook a botched overhaul of its home credit business by replacing its army of self-employed doorstep collection agents with direct employees.

Provident has since been working towards repairing its brand, and in 2019 fended off a hostile bid from smaller rival Non-Standard Finance.

Its hopes of turning CCD profitable again were derailed by the COVID-19 crisis, which hammered lending volumes and drove up costs.

The FCA is looking into CCD’s lending criteria and how it has applied the financial ombudsman’s decision on its complaint handling process over the past year, said Provident, adding that the probe was unlikely to end until 2022.

Provident’s Moneybarn unit was fined last year by the FCA over unfair treatment of customers following a separate investigation, while another probe into its credit card business Vanquis Bank led to it paying out tens of millions of pounds in compensation.

The company said if the settlement scheme does not go through, it was likely that CCD would be placed into administration or liquidation.

“CCD was on track to break even on a monthly basis during 2020, prior to COVID-19,” the company said.

Complaints to the FOS across the home credit market tripled in the second half of 2020 from the first, driving up Provident’s payments to customers by ten times to 25 million pounds.

“Given PFG’s history, regulatory investigations should not come as a major surprise,” KBW analysts, who have a “market perform” rating on the stock, said.

“(We) would not expect any operational repercussions for Vanquis and Moneybarn as a result but (it) could impact relationships with customers, regulators and suppliers.”

$1 = 0.7177 pounds Reporting by Muvija M and Chris Thomas in Bengaluru; Editing by Ramakrishnan M. and Jan Harvey