Vanquis To Pay £169m Compensation To 1.2m Credit Card Customers

The owner of credit card lender Vanquis, the troubled doorstep lender Provident Financial, has been fined almost £2m and ordered to repay £169m to customers.

The Financial Conduct Authority (FCA) said Vanquis is to hand back interest charged to customers sold an add-on product called Repayment Option Plan (ROP) which was not fully explained.

The compensation, the regulator said, covers charges from June 2003 to 31 March 2014 paid by 1.2 million of its 1.7m customers.

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."

The fine and compensation package draw a line under some of the problems faced by parent Provident, which says it is attempting to rebuild trust on several fronts.

It endured one of the largest share price falls ever seen in the London market in August, when it announced a massive profit warning and its chief executive departed.

Peter Crook paid the price for financial difficulties in its consumer credit business linked to reforms under his watch, including the launch of a new computer system for doorstep collections which frequently sent staff to the wrong places at the wrong time.

That led to repayments being missed by customers.

It continues to face a regulatory probe by the FCA into affordability assessments for car finance and the treatment of consumers in financial difficulties within its Moneybarns division.

In announcing its financial results for 2017 on Tuesday, Provident said it had booked charges of £172.1m relating to the Vanquis investigation - taking the group to a pre-tax loss of £123m.

It had made profits of £344m in the previous 12 months.

The company also confirmed it planned to raise another £300m from shareholders via a rights issue to help cover the cost of the regulatory inquiries and fund its recovery.

It put an estimated liability of £20m on the Moneybarns probe.

Shares soared by more than 70% in response to the update - with analysts attributing the recovery to the cash call seeking much less money than the £500m initial reports had suggested.

New chief executive, Malcolm Le May, said: "When I became group CEO, I stated my key objective was to execute a turnaround of the group.

"Today we have made progress on that objective by agreeing a resolution with the FCA in relation to Vanquis Bank and we now have a clear view on the estimated cost of the FCA investigation of Moneybarn.

"To grow the business and deliver long-term sustainable returns to our shareholders, PFG needs to strengthen its balance sheet.

"Today we have announced a proposed rights issue to raise net proceeds of £300m which the board believes will allow the group to implement its strategy and restart paying a progressive dividend in 2019.

Image: Vanquis Bank in hot water with the regulator.