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.
If you currently have this, should you cancel it? And can you claim a refund?
October 2017 update – after this article was written in late August, the results of the first few complaints are coming through, see 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.
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. And paying it means less of your monthly payment will be repaying your balance, so you can end up being charged a lot more interest on the credit card.
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!
I think this is so high is 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:
- he understood the Plan;
- the sales script was followed;
- the information about the Plan was correct and not misleading;
- the pricing was clear;
- he accepted the plan and there was no pressure to take the plan.
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.
So 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 charge… look at what the true cost to Mr N was for his ROP product. By paying this huge amount, 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 be seriously considering cancelling it!
Complain about it?
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 real financial problems at the moment, you may want to ask for a refund now and not wait – 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. In this case, I don’t see any point in waiting, I suggest complaining 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).
How to complain to Vanquis
It’s easy – Mr N sent a short email and back came his refund a few weeks later!
The email address for complaints to Vanquis is firstname.lastname@example.org. I suggest putting ROP COMPLAINT in as the email title.
Your complaint doesn’t have to be complicated and you don’t need to know how much you paid in the ROP fees or guess what the associated interest may be. A typical one could look something like this, but make sure you change it to tell your story:
October 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, but many more cases are still waiting for Vanquis to reply.
What we know so far:
- 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;
- if your account is closed, you get sent the refund as a cheque. If it is open, the refund is deducted from your current balance;
- 1 person was sent a cheque for £100 as Vanquis realised they had been incorrectly reporting his account to Equifax after it had been closed! His “real” ROP complaint is still in progress.
- 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 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!
- 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.
A rejected complaint? Or does the amount look wrong?
A refund – but is it big enough?
Do check that a refund offered looks right. If you had the ROP for years, then the “associated interest” figure should be large! If you aren’t sure, ask Vanquis for a breakdown of how this was calculated and send it to the ombudsman if they refuse to give you this. Ask in the comments below if you aren’t sure.
A rejection – don’t give up!
If Vanquis reject your complaint, don’t just accept this – think about whether you have a case to take further. If you aren’t sure, post in the comments below this article!
If Vanquis say the product was properly explained to you and you accepted it in the phone call, it’s a good idea to ask for a copy of this call. One person who did this (see Phil’s comment on 19th November below) found when he listed to the call that he had twice said he didn’t want the ROP and the interest rate was not explained to him!
Even if you did say you want the ROP and it was “explained” to you, this explanation would not have included telling you that interest could be frozen if you got into difficulties even if you didn’t have the ROP… so this would still be a good case for mis-selling if it was the “2 year interest freeze” that you thought was the most important feature.
If you opened the Vanquis account more then 6 years ago, it is much less likely that you will win. It’s up to you if you want to take it to the Ombudsman.
How to send a complaint to the Ombudsman
The easiest way is to use their online system, see How to complain to the FOS, which walks you through all the information the Ombudsman needs such as your date of birth and how you would like them to communicate with you. This isn’t complicated – the complaint itself can just be a copy of what you sent to Vanquis.