Vanquis credit cards profit from 'new PPI'

credit cards mix©

SUB-PRIME credit card provider Vanquis makes a large proportion of its profits from the sale of Repayment Option Plans (ROPs), it emerged this week.

Vanquis held an investor day on Tuesday, a chance to show off the business to potential shareholders and, possibly inadvertently, a chance for the rest of us to pay some attention to the man behind the curtain.

The provider's presentation [pdf - page 96] showed that it makes 67% of its profits from interest charges, 19% from fees (for missing a payment or making a cash advance, for example) and a further 14% from other products.

The 'other products', analysts pointed out, is in fact primarily composed of Repayment Option Plans, a policy with eerie similarities to payment protection insurance (PPI).

Repayment options

As that comparison suggests, a Repayment Option Plan is precisely the kind of product the Office of Fair Trading (OFT) recently warned credit card providers about selling.

It's sold alongside credit cards and allows cardholders to freeze repayments for 1.29% of every £100 of outstanding balance each month.

So if your outstanding credit card balance was £900 (which the average Vanquis credit cardholder's is) you'd be paying £11.61 a month just to own it.

According to investors who attended the meeting three quarters of new Vanquis credit cardholders take a ROP and over half of existing account holders pay for the product.

It's not quite insurance so it's regulated by the OFT, rather than the Financial Services Authority (FSA) which was at the forefront of investigations into PPI.

However, the similarities to PPI policies are hard to ignore.

The plan promises cover if, for example, "you become sick, disabled or have an accident... your main home is significantly damaged by a natural disaster... you become unemployed involuntarily... you go on maternity, paternity or adoption leave."

There are then two options for cover in this case.

A repayment freeze is designed to tide cardholders over until the end of the financial difficulties by ensuring that they don't pay any penalties during the entire period for not making any payments.

There's also the option of taking a payment holiday, in which case cardholders can skip some repayments without penalty but the card will continue to accrue interest.

Allegations of mis-selling

Posts from Vanquis customers on forums and message boards reveal that the distinction between this cover and that offered by PPI is even more blurred in practice.

Many cardholders seeking help on such forums believe that they were sold PPI rather than ROP because, they say, the product wasn't properly explained to them during the sign up process.

Others claim that ROP was added to their credit card payments after they were pressured into agreeing to take the deal or even after asking not to sign up to the policy.

Allegations of exactly the same poor selling methods exactly recall the first blush of the PPI scandal, when consumer complaints began in a trickle and built up to a flood of redress payments and eventually resulted in stricter FSA guidance.

However, Vanquis have been quick to point out that ROP is a fully regulated product and consumers are free to complain to the Financial Ombudsman Service if they feel that the product's terms are unfair or that they were mis-sold.

The FOS has only found against Vanquis Bank in one instance in relation to the sale of ROP and the FOS's latest complaints data reveals that no cases were bought to the ombudsman relating to general insurance between January and June 2011.


18 May 2015
Carol hall

Just had a phone call from Vanquis trying to get me to purchase a repayment protection plan. I just told them I'm already giving the company £50 a month in interest, so I can't afford this plan. I urge anyone on the plan or thinking about going on it not to do so. It is another PPI scheme and Vanquis should not be hounding people about this product. Had I taken this insurance out, I would have been paying another £22 extra a month. People don't be gullible, you really don't need this insurance, it is making Vanquis millions off vulnerable people.

23 April 2015

I used to work in getting PPI back for people, and this is effectively just the same, under a different name.

27 May 2014

I have ROP on my card. It actually comes in handy if you use it properly. Then again I read all the T's & C's which you should always do when you buy anything. Also the ROP is only able to be put on your card via verbal consent. So two scenarios... the idiot working there ticked the yes button instead of no (you'd get a refund as all calls must be recorded) or the customer agreed to it, forgot about it, didn't bother checking their statements and then decided to complain about it instead of blaming themselves.

29 December 2012
John Hemming-Clark

With a return on capital of 43.70%, Vanquis Bank Ltd is positioned 4th in this table of UK banks. Return on assets figure of 9.19% places it second. With a pre-tax profit growth of 91.85% it is positioned 13th; 25th in asset growth and 17th in capital growth. (Not surprising, therefore, that its highest paid director received £1,700,000 putting them 12th in that table). Lucky parent, Provident Financial Plc; unlucky Vanquis customers who pay a "representative 39.9% APR at present", a cash advance fee of 3% (minimum £3 - making taking out a tenner a 30% cost), and foreign currency transaction charge of 2.99%.

14 November 2012
L. Chapman

The plan promises cover if, for example, "you become sick, disabled or have an accident... your main home is significantly damaged by a natural disaster... you become unemployed involuntarily... "

I didn't know I had it until I asked what the charge was for and was told what it was and what was covered. I said that I had lost my job (dismissed) so obviously not a voluntary choice BUT when I asked if I could claim I was told NO because it doesn't cover dismissal. It is all a con and really ought to be treated as a PPI. All it did was get me deeper into debt, I did tell them to stop it as it was no use to me but it is annoying that I had been paying for something which I never asked for and for a number of years.

5 October 2012
Lyndsey Morrison

I pay my Vanquis card by direct debit and as I do not use it much I only open statements as and when I check transactions! Little did I know after a recent over the limit and default charges being applied despite not using it and making minimum payment online that its a ROP that is the transaction which is sending me over the limit and basically I never knew it was there!!!

I do not recall consenting to this and when they are contacted they are about as useful as a chocolate fireguard!!!

10 April 2012

I also have this card. In my opinion the ROP is just a cleverly disguised form of PPI. What I cannot understand is why this particular policy has not also been redeemed refundable, to everyone with a card that has paid into it.

This card is given to people with a poor credit rating who want to try to improve their credit rating, but in doing so they are also taken for huge interest rates. I have looked at their profit margin, and this can only be made from the amount of interest, over the limit fees, late payments and last but not least the worthless ROP they are charging to customers. I don't care who regulates, this company should be made to pay back all the money and interest it has collected for this diabolical premium.

I am in the process of trying to get all mine back as I believe it could never help me. I think this should be looked into by the relevant body who regulates this sort of thing. And everyone who has a problem with it should be complaining.

If everyone continues to just pay ROP and huge numbers don't challenge it, then it will be forgotten about. And the huge numbers of people that are already struggling just to try and pay of what they owe, will find they sink further into debt with this card.

12 March 2012
Jay Brunger

I have this product and Vanquis refused to cover me. I complained to the FOS and they agreed that I had the right to claim under two sections of the policy, there are only four options, yet the resulting decision leaves me worse off than if I had just defaulted.

Cut up your cards, never communicate with them and wait seven years would be my advice because good honest attempts to repay your debt just mess you up. You do not need credit to live and will be happier without it.

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