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Although Vanquis are reportedly paying their 1.2 million customers around £169 million in refunds, there is a worry that some of these refunds are too small.
If you have ever had a Vanquis credit card, and had their Repayment Option Product (ROP) add-on, Vanquis will be refunding you the extra interest it has charged you. This will apply even if you have now closed your account. The reason that it is doing this is because they have told to do this by the regulator, after they listened to 40 phone call recordings to Vanquis customers.
In every single call, Vanquis failed to explain that the ROP fee would be added to the customer’s account, just like a purchase on the credit card.
What's the problem with this?
It meant that, unless the customer paid the whole balance in full, the following month interest would be charged on the ROP fees. This interest is at the rate normally charged on the credit card, which is very high - as much as 40%, 50% or more!
It also compounds, meaning that the month after another ROP charge is added, and you then pay interest on the extra interest you were charged the previous month. It all adds up VERY quickly!
Who will get a Vanquis refund?
Anyone with a Vanquis card paying for ROP will get a refund of the extra interest, unless you have always repaid the balance in full every month. If you did that, then you would never have paid any interest on it, so there is nothing to be refunded.
Vanquis says it will be refunding over a million customers. The first emails about refunds went out a couple of months ago, but most people haven’t been told yet. The refund will be taken off your balance if you have one or sent to you by cheque if your account is closed.
How can you tell if you are paying ROP?
The ROP charge each month is shown on your credit card statement. Your statement doesn’t show you the interest you have been paying because of the previous month’s ROP charges – that is all bundled into the purchase interest you are charged, not shown separately. So you can’t tell if your refund is right.
The bad news - Vanquis refunds seem to be too low!
Debt Adviser, Sara Williams, has been looking at these refunds and thinks they look much too low.
This is because Vanquis is using a calculation that pays them off too soon and it is also stopping the calculation at the end of 2016.
Sara says "Even if you had a large balance on your credit card, you would still be paying interest on the earlier ROP charges – that doesn’t sound right to me!"
If you are in any doubt, then please take the time to look at Sara’s Debt Camel website. It has a page which looks into this in detail, and also has a template you can use to get in touch with Vanquis and ask them to look at your calculation again, Don't delay - Vanquis Refunds – it’s time to complain!
Who is this for?
If you only ever had a low balance, or you often paid it all off, then the refund may not be wrong by a lot. But if you had a large balance for a long time, or if you ever had extra charges for going over the limit, then the Vanquis calculations could be very wrong.
Sara thinks that it could be 10 or more times too small, and thinks that it is worthwhile complaining. "You have already been misled by Vanquis not explaining the full cost of the ROP. Vanquis should be fair when they are working out these refunds and they should be more transparent, telling a customer exactly how their refund has been calculated. Not just giving you a figure and not explaining it."
The bigger picture
I am a great believer in people taking control of their finances. That includes being very vigilant about monthly charges, see "How small smart choices can save you money."
The charge for this ROP may have sounded tiny to people when it was being sold “Only 1.29 per £100 of your balance”. However that was a monthly charge and, with compound interest being added to it, meant that over the years people have paid thousands of pounds for the ROP itself, as well as the extra interest. Rather than just accepting a low monthly charge, take your time, and think about what it will add up to over the year.
Another example of people paying out unnecessary charges is with credit reports. A lot of people are paying £15 a month or more to check their credit scores. That may sound responsible and sensible, but it's £180 a year, which is a lot of money when you can get free reports on your credit scores.
As well as checking that your Vanquis refund is enough, please cancel this ROP if you are still paying it. Also look through your bank and credit card statements to find other monthly charges you may have forgotten and cancel them too.
Hi, I’m Eileen Adamson, Your Money Sorted coach, empowering professional women to become happier, healthier and wealthier. By showing you how to make small, sustainable changes, I can help you create the financial security and freedom you deserve.