Credit card firm, NewDay, will refund over £4 million to over 180,000 customers following disclosures made to the Financial Conduct Authority (FCA).
In 2015, NewDay reported that it had undertaken a review of its business in preparation for the FCA’s new regulatory regime for credit, which commenced in April 2014. This included looking at the fairness of its charging model. NewDay had identified that, in a small number of circumstances, default fees and other charges triggered additional charges in a way they considered unfair. In addition, delays in posting transactions also meant some customers incurred additional charges NewDay felt were unfair.
NewDay immediately proposed to make a series of changes, including the removal of some of the circumstances when default fees may be charged and setting up a suite of tailored alerts to enable customers to avoid incurring fees by making prompt payments. More recently, NewDay also proposed to provide redress to the impacted customers which the FCA will be monitoring.
NewDay determines that approximately 3% of its customers will be due redress under its scheme.
Customers within the scope of the scheme do not need to take any action as NewDay will be writing to them over the next two to three months. In most cases, the customers will receive a credit on their account. A limited number of customers will receive a cheque for the redress owed. Customers may also receive various additional compensatory interest payments depending on their individual circumstances.
NewDay will take all the necessary steps to contact historic customers.
NewDay’s scheme will not cover customers charged the relevant fees before 1 April 2014 although the firm will consider any complaints made in respect of these on a case-by-case basis.
Jonathan Davidson, director of supervision - retail and authorisations at the FCA said:
'The FCA welcomes NewDay’s proactive approach to ensuring it treats customers fairly. The FCA expects all firms to consider the fairness and impact of their default fees and charges. It is important that firms, where they identify concerns in relation to their fees, disclose those concerns to the regulator, proactively act on those concerns and keep the regulator informed.
'NewDay has disclosed this matter to us and has committed to putting things right for its customers. Where firms identify unfair overcharging within their policies and systems we would encourage firms to undertake similar initiatives.'
Notes to editors
- In November 2015, the FCA published the interim findings of its credit card market study.
- On 1 April 2014, the FCA took over responsibility for consumer credit and the regulation of 50,000 consumer credit firms.
- On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.