Doorstep lender told to pay £169M in compensation to customers
A division of troubled lender Provident Financial has been told to pay almost £169m in compensation to customers.
The Financial Conduct Authority (FCA) said Provident’s Vanquis unit failed to properly disclose charges on one of its popular repayment plans. The Bradford-based company has also been fined £2m.
Provident announced a £123m loss in 2017 and plans to raise £331m from shareholders to meet the extra costs and bolster the firm’s finances.
Provident run into trouble with the FCA for mis-selling its Repayment Option Plan (ROP) – an option on its Vanquis credit card.
While it was supposed to help customers manage their debt, the product put borrowers further into debt, rather than help them cope with debt woes, the FCA concluded.
Mark Steward, director of enforcement and market oversight at the FCA, said: “Most Vanquis customers chose the ROP to help manage their credit without realising instead that the product might lead to their indebtedness increasing.
“Vanquis has decided now to do the right thing by acknowledging the wrong-doing and offering to compensate its customers.”
The FCA said none of the Vanquis sales calls that it had monitored had correctly informed potential customers of the charges they would pay under the ROP credit plan.
The scheme allowed borrowers to freeze repayments on their credit card debt temporarily. Whilst agents explained the monthly charge of £1.19 to £1.29 per £100 of credit, they failed to mention the additional interest rate that was charged on outstanding balances, which could range between 19.9% and 79.9%.
Vanquis has been ordered to pay back the interest payments to any customers who were not properly informed.