The FCA issued the £1.976m fine to credit card lender Vanquis, a subsidiary of Provident Financial plc and a FTSE 250 company with approximately 1.7 million customers. It’s believed to be one of the biggest compensation packages every awarded by the FCA.
The firm will repay an estimated £168.78m in compensation to customers for failing to disclose the full price of its Repayment Option Plan, the FCA said.
Sales agents failed to explain the long term cost of the product to customers in 100 per cent of calls reviewed by the FCA.
The compensation constitutes the amount of the charges not disclosed to customers when they bought the product.
The ROP was offered to all Vanquis credit card customers from June 2003 as a way of helping them to manage their account. The add-on was a credit management tool that permitted customers to freeze their credit card account, take a payment holiday for one month per year, utilise a lifeline that would avoid late fees for one month per year, and receive SMS alerts relevant to their account.
An FCA statement read: “When selling the ROP, Vanquis told customers how the product worked and what the monthly charge was but did not inform customers that the full cost of the product included an interest component where there was an end of month unpaid balance on their credit card.
“The FCA has ordered Vanquis to pay back the interest customers were charged on the ROP from 1 April 2014 to when customers were informed of the full cost of the ROP. Vanquis has voluntarily agreed to pay back the interest customers were charged on the ROP from June 2003 to 31 March 2014, because before this time the FCA was not responsible for regulating the consumer credit market."
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. Customers are entitled to be told all relevant information when being offered financial products. These were very serious breaches.
"Vanquis has decided now to do the right thing by acknowledging the wrong-doing and offering to compensate its customers.”
The FCA requested Vanquis freeze sales of the ROP in April 2016.
The FCA fine was reduced from £2,822,900 to £1,976,000 because Vanquis agreed it had breached FCA principles and was eligible for a 30 per cent discount.