UPDATE: 27 February 2018 – Victory! Vanquis is made by the FCA, its regulator, to offer refunds of the additional interest charged to all cardholders who have had ROP.
UPFATE: 2 August 2018 – Well only a partial victory :( The refunds Vanquis is actually paying out are a lot smaller than they should be. Read Why the ROP refunds are too small and how to complain.
I am leaving this old article here as a lot of readers commented on it.
Vanquis Bank’s Repayment Option Plan (ROP) for its credit cards is being investigated by the regulator, the Financial Conduct Authority (FCA). This was announced by Provident, who own Vanquis, on 22nd August 2017.
This article looks at whether you should cancel this ROP if you are still paying for it and complain and ask for a refund of ROP. The details of one refund are shown – you may get a large amount back because you also get a refund of all the interest that was charged on your ROP fees.
Many readers have got hundreds or even thousands back, see all the comments below.
What is the ROP and why is the FCA looking at it?
Vanquis’s ROP is a bit like insurance, offering some features that could help if you have difficulty with repayments to the credit card.
The main feature is an “account freeze” if you get into financial difficulty: no payments needed, no interest being added and your credit record is protected. You can’t just ask for a freeze, you have to supply evidence eg that you have lost your job, send an income and expenditure sheet etc
There are also some other short-term options if you miss a payment or want to miss a month’s payment, but the ROP would be a VERY expensive way to get these minor benefits. The “no impact on your credit rating” feature may sound nice, but it’s not worth much unless your credit rating was actually good. People with a credit rating worth protecting don’t usually have a Vanquis card at all!
The cost – £1.29 per £100 outstanding – may not sound high. But that monthly charge adds up to a lot over the year.
The ROP charge is also treated as a purchase on your Vanquis card, so unless you repay the whole balance every month, the next month you will be paying interest on the previous months ROP charges.
If you only repay the minimum amount and you are having ROP charge added, your balance is hardly going to drop at all.
What are the FCA concerns likely to be?
The Provident announcement said:
The FCA indicated that it has concerns about the ROP product and is investigating the period from 1 April 2014 to 19 April 2016. Vanquis Bank agreed with the FCA to enter into a voluntary requirement to suspend all new sales of the ROP in April 2016 and to conduct a customer contact exercise, which has now been completed.
That’s the only public information – the rest of this is my speculation.
The FCA’s main objection is probably the fact that Vanquis are charging for this account freeze, which is something they should be offering to all customers in difficulty without any charge. FCA rules (CONC 7.3.4) say:
A firm must treat customers in default or in arrears difficulties with forbearance and due consideration.
“Forbearance” in this sort of situation often involves freezing interest. So the FCA rule means that all customers may have their interest frozen when they are in difficulties.
If Vanquis didn’t explain this to customers when it was selling them the ROP, this may well have been misleading and the product may have been mis-sold.
Why only from 2014 to 2016?
The FCA’s investigation starts from 2014, when the FCA took over regulating this sort of debt.
But the previous regulator, the OFT, had very similar wording. It described failing to treat borrowers in default or arrears difficulties with forbearance as an unsatisfactory business procedure, and said creditors should consider reducing or stopping interest and charges when a borrower evidences that he is in financial difficulty.
So although the FCA isn’t looking at older cases, this suggests that the customers who paid for the ROP before 2014 were not fairly treated either so they too can complain.
How much could a refund be?
One Debt Camel reader, Mr N, complained to Vanquis about the ROP earlier this year. This is the refund he was given:
He only had the ROP for a short period in 2011/12 so the ROP fees weren’t high. But look at the extra interest that was refunded – £720 – wow!
This is high because Mr N didn’t repay his card balance in full every month. Paying for the ROP meant he was paying less off the balance on the card. He was effectively paying 39% interest on his ROP payments for nearly 5 years and that is what he is being compensated for.
How did Mr N get that refund from Vanquis?
Mr N complained that he felt he had been pressured into signing up to the ROP which wasn’t right for him. Vanquis listened to the phone call from 2011 when he signed up to the ROP to check that certain points had been properly explained to him. The investigator concluded:
although you did accept the repayment option Plan as a feature of your account, I do not feel all these points were satisfied when discussing the plan with you.
What should you do now?
Cancel the ROP?
It’s always hard to suggest that people should cancel insurance, however ridiculously over-priced it is. You might cancel the ROP and then lose your job next month… But the regulator’s rules mean that if you do get into difficulty, you can ask Vanquis to freeze interest on your account, see What to do if you can’t pay a bill this month.
You have to think about the cost of the ROP. Not the headline £1.29 a month per £100 charge… look at what the true cost to Mr N was for his ROP product. Paying ROP makes it much harder to get your Vanquis balance to drop as so much of your monthly payment is eaten up by the ROP charge, so you are actually more likely to end up in financial difficulty!
There may be hundreds of thousands of people who still have ROP on their Vanquis cards. I think they should all be seriously considering cancelling it!
Complain about it? (this was written before the FCA’s decision in February 2018)
If you took out the ROP after April 2014, your case will be among those being looked at by the FCA. You could decide to wait and see if you get awarded any automatic compensation. But if you have financial problems at the moment, you may want to ask for a refund now as there is no indication how long the FCA investigation may take.
People who were sold the ROP before April 2014 are unlikely to be included in any redress scheme the FCA proposes. But they can still get refunds if they ask for them. So complain to Vanquis now and asking for a refund of the ROP fees plus the associated interest you paid on the card.
You can complain if you are still paying the ROP or if you cancelled it. It doesn’t matter if you still have the Vanquis card and owe a balance, or you have closed the card. You can also complain if you are currently in debt management.
Don’t complain if:
- you have gone bankrupt after you got the Vanquis card (the refund would go to the Official Receiver)
- you are currently in an IVA (the refund would go to your IVA firm);
- you are currently in a DRO (your DRO could be cancelled if you get a refund).
October 2017 update – some of the first complaints upheld
About 8 weeks since the first complaints went in based on this article we have the first few results:
- people have been offered refunds of £418, just under 3k, £1600, £507, £285 (that was only for 6 months ROP) and £531;
- most are happy with the offered refund but one is going to the Ombudsman as the numbers don’t reflect what he thinks he paid;
- people who applied for the card more than 6 years ago have had their complaints rejected – some of these are going to the Ombudsman;
- 3 people who took out the ROP in the last 6 years have had their complaint rejected.
Obviously there could have been a lot more decisions – I am just going on what has been reported in the comments below this article.
November 2017 update – more complaints upheld
Increasing numbers of results reported:
- refunds offered of £303, £448, £321, £508, £1,255, £1,286, “full refund”, £4,279.
- 4 people who took out the card within the last 6 years have had their complaint rejected, 1 person asked for a copy of his phone call and was sent one that clearly showed he had rejected the ROP – he has sent the case to the Ombudsman.
- 2 people who opened accounts more than 6 years ago have had their complaint rejected.
- Vanquis have missed the 8 week deadline in a few cases.
December 2017 onwards
Lots more people have been getting refunds, too many for me to keep track of. See the comments below for recent examples.
A few interesting cases:
- one reader has her complain accepted because Vanquis couldn’t find the call recording;
- one reader has had a decision from an adjudicator at the Financial Ombudsman that the FO can look at cases where the account was opened over 6 years ago. Good news – although it could still be challenged by Vanquis.