Investigation into credit card plan revealed
The Financial Conduct Authority (FCA) is investigating a product offered by Provident Financial’s credit card business, Vanquis Bank.
The industry watchdog is examining Vanquis’s repayment option plan (ROP) over a two-year period up to April 2016.
The plan, which generates about £70m per year for Vanquis, allows customers to take a payment holiday or freeze their accounts without impacting on their credit rating.
Vanquis entered into a “voluntary requirement” to suspend all new sales of the ROP after the FCA raised its concerns.
It also agreed to conduct a customer contact exercise, which it says it has now been completed.
However RBC Capital Markets analyst Peter Lenardos expressed his surprise that details of the FCA investigation had not been made public sooner.
“Given that the FCA investigation has the potential to be material to the company, investors are likely to take the view that this investigation should have been disclosed when it was known,” he said.
Provident Financial revealed some details of the investigation alongside announcing a second profits warning and the departure of chief executive Peter Crook. The bad news sent the FTSE 100 group’s share price into a tailspin, falling 70% in the morning’s trading.
Vanquis Bank has also agreed with the Prudential Regulation Authority, pending the outcome of the FCA investigation, not to pay dividends to, or enter into certain transactions outside the normal course of business with its parent company without the Authority’s consent.
