In February the FCA ordered Vanquis to refund £168m to customers using its ROP product, because Vanquis had not explained the additional interest people were being charged.
At that point, Vanquis said it would refund customers with open Vanquis accounts within three months.
In June, Vanquis gave up on that three-month target and said it hoped to refund people with open accounts by the end of the summer.
Well, summer is over and few people have had a refund! One reader was told:
I am sorry that we have not been able to provide your refund as quick as we had expected. The process of refunding interest on ROP is very complex and is taking longer than we first anticipated. I understand this will be disappointing for you, but please rest assured that we are working as quickly as we can, and our number one priority is ensuring that you get the money you are owed. We have agreed with the FCA that all ROP Interest Refunds will have been repaid to customers by 27th February 2019.
I can understand how locating old customers who closed their accounts years ago would take a while – they may have moved, died, changed their names etc. But Vanquis knows where its current customers are and it should be easy to credit their accounts.
Every month Vanquis delays, it makes more money
In June, after the first delay was announced, I said that every month the refund was delayed meant that people would get a larger refund. So although the wait was annoying, Vanquis were not doing this deliberately, intending to profit from it.
But that turns out to be wrong…
In August Vanquis finally explained how they were calculating the refunds. They have interpreted the refunds in an odd way – they are stopping paying refunds after a date in late 2016/early 2017 when they wrote to each customer explaining the true cost of ROP.
Look at this example:
A customer received his ROP cost explantation letter in December 2016 (some people never seemed to get these, but that is a different problem!)
At that date, he could have cancelled the ROP.
But if he had a balance on his credit card some of that – possibly a large amount – would have been caused by the accumulated additional interest on ROP that Vanquis has to refund.
Whether the customer cancelled the ROP or not, he would still be charged interest every month on that accumulated amount at the Vanquis card interest rate, which could be 40%, 50% or more.
As a result, every month that Vanquis delays giving a refund to this customer, they are charging him more interest which will not then be refunded.
So by delaying the refunds yet again, Vanquis is making larger profits. That is an unfair way to do these refund calculations.
What should happen? Vanquis should carry on refunding all the extra interest they charged on the already accumulated ROP before the December 2016 letter right up to the date of the refund. But Vanquis shouldn’t have to refund the extra interest in ROP that is charged after the December 2016 letter, when the customer could have cancelled. That would be fair but (so far as I can tell) it’s not what Vanquis are doing.
Larger minimum payments make the refund delays worse
Vanquis increased its minimum payments in the summer. On its own that wasn’t a bad thing – for too long Vanquis’s low minimum payments have kept many of its customers trapped in persistent credit card debt.
But it has put an extra strain on customers, which seems unfair when many of them will be getting a refund. They are being forced to pay more each month on a balance which Vanquis knows is too high. For some people who were only just managing before, this may have pushed them over into defaults.
The refunds being paid are too low
Stopping the refund calculations too early is one of the reasons why the few refunds that have been paid look too low.
A second problem with the refund calculations is that Vanquis are not correctly applying the FCA’s rules about paying off parts of a credit card balance that attract high rates of interest first, before paying off parts that are on low on 0% interest.
If you have received a refund, it is probably a lot too low unless you often cleared your Vanquis card balance down to zero. See Vanquis – it’s time to complain which has a template letter you can use to send to Vanquis.