The Financial Conduct Authority (FCA) is looking into the group's vehicle and van financing franchise Moneybarn.
Provident said in a regulatory update for investors that the FCA, Britain's financial services watchdog, is scrutinizing how its Moneybarn subsidiary treats consumers who are in financial difficulty.
It is the latest in a string of blows at the former FTSE 100 company.
The lender's shares fell almost 16 per cent on the new probe, capping a brutal year which has seen it issue profit warnings and announce the death of executive chairman Manjit Wolstenholme. Numis Securities reiterated a "buy" rating and issued a GBX 1,091 ($14.68) price objective on shares of Provident Financial in a report on Wednesday, August 30th.
According to reports, almost 20 per cent has been wiped off the value of Bradford-based lender after the the watchdog's investigation announcement into Moneybarn.
Its parent firm responded to the inquiry by saying: "Provident Financial Group aims to act responsibly in all its relationships, and to play a positive role in the communities it serves".More news: PC James Dixon: Tributes to officer killed in crash
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Neil Wilson, a market analyst at ETX Capital, said Moneybarn only has around 50,000 customers compared with more than 2m across the whole group.
Since that date, the company said the FCA has discussed processes with Moneybarn and it has made a number of improvements, including to the way it deals with future loan terminations.
The company said at the time it expected to make a loss of between £80 million and £120 million this year, as debt collection rates plummeted from 90% in 2016 to 57%.
The investigation comes at a hard time for the lender.
The FCA declined to comment on the investigation.
Greenwood said it wasn't clear yet whether there had been any wrongdoing, but for the FCA to investigate there must be some cause for concern. "On that front the outlook is very uncertain".