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Provident Financial subsidiary fined by the FCA

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A division of troubled lender Provident Financial, has had a fine of almost £2m imposed by the Financial Conduct Authority for failing to disclose the full price of an add-on product.

Credit card lender Vanquis received the fine for charges associated with its Repayment Option Plan (ROP). The firm will also repay an estimated £168,781,000 in compensation to 1.2 million customers – equivalent to the amount of the charges not disclosed to customers when they bought the ROP.

Vanquis Bank is the UK largest ‘low and grow’ credit card issuer in the UK. It aims to help people repair their bad credit scores. The FCA found that while the group told customers how the product worked and the monthly charge, it didn’t tell users that the full cost of the product included an interest component where there was an end of month unpaid balance on their credit card.

As such, the group must now pay back the interest customers were charged on the ROP from 1 April 2014 to the point at which customers were informed of the full cost. Vanquis has voluntarily agreed to pay back the interest customers were charged on the ROP from June 2003 to 31 March 2014 (before this time the FCA was not responsible for regulating the consumer credit market).

Vanquis has offered the ROP since June 2003 as a way of helping borrowers manage their account. It is a credit management tool that permitted customers to freeze their credit card account, take a payment holiday for one month per year, use a lifeline that would avoid late fees for one month per year, and receive SMS alerts relevant to their account.

‘Very serious breaches’

Mark Steward, director of enforcement and market oversight at the FCA, said: “Vanquis failed to make sure customers were informed about the full cost of the ROP when it was offered to customers. Most Vanquis customers chose the ROP to help manage their credit without realising instead that the product might lead to their indebtedness increasing. Customers are entitled to be told all relevant information when being offered financial products. These were very serious breaches.

“Vanquis has decided now to do the right thing by acknowledging the wrong-doing and offering to compensate its customers. We are pleased the firm has extended the compensation to customers who purchased the ROP before we took responsibility for regulating the consumer credit market.”

In 100% of calls reviewed by the FCA, sales agents did not explain the full cost of the product to customers. Although they explained the monthly charge of either £1.29 or £1.19 per £100 of a customer’s outstanding balance, they did not explain to customers that the ROP could attract interest at the card rate – at a rate of between 19.9% and 79.9%.

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