Release Date: 27th February 2018

To access the original FCA document, click here.

Summary

The Financial Conduct Authority (FCA) has fined Vanquis, a credit card lender, £1,976,000 for failing to disclose the full cost of its Repayment Option Plan (ROP). Additionally, Vanquis has been ordered to pay an estimated £168,781,000 in compensation to affected customers. The penalty was imposed because Vanquis did not inform customers that the ROP included an interest component on unpaid credit card balances, leading to customers being unaware of the full cost of the product.

Between June 2003 and April 2016, Vanquis offered the ROP to all its credit card customers as a credit management tool, but it failed to disclose that the ROP could attract interest at the card rate, compounding unless the account balance was paid in full each month. The ROP was marketed as helping customers manage their accounts by providing features such as freezing the account, taking a payment holiday, and avoiding late fees.

Mark Steward, Director of Enforcement and Market Oversight at the FCA, highlighted that Vanquis’s failure to inform customers of the full cost of the ROP was a serious breach, as it misled customers who thought they were managing their debt more effectively. Vanquis acknowledged its wrongdoing and agreed to compensate customers, extending this compensation to cover the period before the FCA regulated the consumer credit market.

Key Takeaways for Other Firms:

• Full Disclosure: Ensure all product costs, including interest components, are fully disclosed to customers.
• Regulatory Compliance: Adhere strictly to Principles 6 (Customers’ interests) and 7 (Communications with clients) of the FCA Principles for Businesses.
• Customer Communication: Provide clear and comprehensive information to customers to enable informed decision-making.
• Proactive Rectification: Voluntarily extend compensation to cover periods beyond regulatory requirements to demonstrate commitment to customer fairness.
• Monitoring and Review: Implement robust systems for ongoing product and service reviews to identify and rectify potential miscommunications or non-disclosures promptly.

In conclusion, the FCA’s action against Vanquis underscores the importance of transparency and full disclosure in financial products. Firms must ensure that customers have all relevant information to make informed decisions, thereby maintaining trust and integrity in the financial system. By adhering to these principles, firms can avoid significant penalties and protect their reputation.