The FCA fines Vanquis £1,976,000 and orders Vanquis to pay compensation to customers

The Financial Conduct Authority (FCA) has today imposed a fine of £1,976,000 on credit card lender, Vanquis, for failing to disclose the full price of an add-on product, called Repayment Option Plan (ROP). The firm will also repay an estimated £168,781,000 in compensation which constitutes the amount of the charges not disclosed to customers when they bought the ROP.

When selling the ROP, Vanquis told customers how the product worked and what the monthly charge was but did not inform customers that the full cost of the product included an interest component where there was an end of month unpaid balance on their credit card.

The FCA has ordered Vanquis to pay back the interest customers were charged on the ROP from 1 April 2014 to when customers were informed of the full cost of the ROP. Vanquis has voluntarily agreed to pay back the interest customers were charged on the ROP from June 2003 to 31 March 2014, because before this time the FCA was not responsible for regulating the consumer credit market.

Since June 2003 the ROP was offered to all Vanquis credit card customers as a way of helping them to manage their account. The ROP was a credit management tool that permitted customers to freeze their credit card account, take a payment holiday for one month per year, utilise a lifeline that would avoid late fees for one month per year, and receive SMS alerts relevant to their account.

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 per cent of calls reviewed by the FCA, sales agents did not explain the full cost of the product to customers. Although the firm’s sales agents explained that the principal cost of the ROP was a 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, which was compounded unless the account balance was paid in full at the end of the month. The APR on the card could vary from 19.9% to 79.9%. Therefore customers did not have all relevant information to make an informed decision when purchasing the ROP.

The FCA requested Vanquis to freeze sales of the ROP in April 2016. Through a customer contact exercise in late 2016 Vanquis disclosed to its customers the full cost of the ROP and gave customers the opportunity to cancel it.

The FCA found that the firm breached Principle 6 (Customers' interests) & 7 (Communications with clients) of the FCA Principles for Businesses.

Customers who had this product do not need to do anything. They will be contacted by the firm directly in due course.

Vanquis is a credit card lender and a subsidiary of Provident Financial plc, a FTSE 250 company, with approximately 1.7 million customers.

The level of the penalty imposed by the FCA was reduced from £2,822,900 to £1,976,000. This is because Vanquis agreed it had breached the Principles and so was eligible for a 30 per cent discount.

Notes to editors

  1. Final notice: Vanquis Bank Limited (PDF)

  2. If customers are concerned they should contact Vanquis on 0330 099 3000.

  3. On 1 April 2014, the FCA took over responsibility for regulating consumer credit firms.

  4. 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).

  5. 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.

  6. Find out more information about the FCA.

For more information contact the FCA press office on 02070663232.