People are starting to get refunds from Vanquis for the extra interest they paid if they had the Repayment Option Plan (ROP). That’s the good news.
But some of the amounts being refunded seem lower than had been expected.
This is the first article in a series looking at this problem.
The second article is Vanquis ROP – over limit charges not included. This doesn’t explain why the refunds amounts are so low for most people, but if you had over-limit charges, that article explains how to ask Vanquis to refund them.
The third article is Vanquis the refunds are wrong – how to complain. That was written when Vanquis had at last given some details about their calculation. It has a template letter for you to use to complain.
A typical refund email
The emails I have seen look like this:
We could have done a better job explaining the way interest was charged in relation to your ROP.
You are entitled to a refund of £x.
You don’t need to do anything – We have agreed with the FCA to make refunds by reducing outstanding balances where possible. Therefore, we have credited your account with £x. This will be shown on [your next statement] as ‘ROP Interest Refund’.
We are writing to you about the recent investigation by the Financial Conduct Authority (‘FCA’) into ROP. We agree with the FCA’s conclusion that we were not clear, during the call where you opted-in to the product, that charges for the Plan attracted interest at your purchase interest rate. We could have done more to ensure you understood the interest charges on ROP, for which we apologise.
You are entitled to a refund of interest relating to ROP from when you were first charged for ROP up until 08/12/2016 This is 30 days after our letter of 07/11/2016, which provided details of the Plan including how interest applies. We have agreed this and the method of calculating the refund with the FCA (under its statutory powers).
What the FCA ordered
In February, the FCA said:
The FCA has ordered Vanquis to pay back the interest customers were charged on the ROP … to when customers were informed of the full cost of the ROP.
So customers aren’t getting a refund of the ROP itself – they are getting a refund of the interest they were charged on the ROP, because this interest was never properly explained to them when they agreed to take the ROP.
Vanquis wrote to customers with ROP in 2016/7 saying how much it had cost them in the previous year. Some people cancelled the ROP at that point. If a customer didn’t cancel, it is assumed they were happy with the cost and so they won’t get a refund of the interest added on for the ROP payments after this letter.
How much should these refunds be?
The purpose of this refund is to put someone back in the situation they would have been if they had been charged the ROP but no additional interest had been added.
The refund calculations are complicated. They depend on how much ROP was charged, what interest rate the customer was paying on their Vanquis card and, crucially, how often (if ever) they cleared all or most of their card balance. Clearing a card balance will have stopped compound interest continuing to accrue on the previous ROP charges, instead 8% statutory simple interest should be added from this point. But compound interest starts accruing on later ROP payments until the balance is again cleared.
I asked Vanquis on June 18th to explain how they think the refunds would be calculated in a couple of simple cases, but so far I haven’t received an answer.
Previous ROP refunds
We already have some real-life examples of the way the extra interest added can be large.
Since last August, many people have complained to Vanquis saying they were mis-sold the ROP. Where these complaints have been upheld, either by Vanquis themselves or by the Financial Ombudsman, Vanquis has refunded an amount made up of the ROP payments plus the extra interest charged plus 8% simple interest where a balance had been cleared.
Here are two examples:
Refund was ROP fees £785.94 + associated Interest £1064.92 + simple 8% £21.56
Refund was ROP fees £188.25 + associated interest £362.28 + simple 8% interest £91.68
The FCA-ordered refunds will be lower than these “full” refunds because customers won’t get the ROP fees back. And they won’t get a refund for the extra interest caused by any ROP they paid after they had received the Vanquis letter telling them the true cost of the ROP.
However, these “full” refunds do show that the interest paymentsresulting from the ROP can often be very large.
The refunds now being paid seem lower
Here are three readers reporting on emails they received last week – the first of the FCA-ordered refunds on the additional interest. These comments were left on my previous article: Vanquis to pay £168 million in refunds for ROP:
People would like an explanation of their refund amount
I can’t explain these recent refunds. There may be something unusual in a particular case, but there have been several low numbers reported.
I think Vanquis needs to state clearly how it is calculating these refunds. If Vanquis give me the explanation of how they are calculating the refunds, I will share it here.
Have you had a low offer?
See Vanquis ROP – the refunds are too low – it’s time to complain for what you should do. That has a template letter.
Please leave any comments or questions on that page, so they are all together!