London-based credit card firm NewDay (which was formerly known as SAV Credit) is to pay refunds totalling more than £4 million to some 180,000 customers, after the firm decided the charges they had paid could have been unfair. The firm alerted the Financial Conduct Authority (FCA) to the issue, and the regulator has praised the firm’s “proactive approach”.
This announcement means that around 3% of the firm’s customers will qualify for some form of refund. NewDay undertook a review of its business model, including its charging structure, and concluded that some customers had paid default fees and fees for delayed payments in ways that may have been unfair.
The firm will write to all affected customers before the end of June 2016. In most cases, the refunds will be paid in the form of credits on the customers’ accounts, although a small number of refunds are likely to be paid via cheque.
The redress initiative only covers fees charged on or after April 1 2014 – when the FCA took over as consumer credit regulator. However, any customers charged fees before this date that they believe to be unfair have been encouraged to submit a complaint to the firm.
As well as committing to pay this redress, NewDay says it has changed its criteria over when default fees may be charged, and has set up a system under which customers will be alerted in advance regarding payments due.
Jonathan Davidson, director of supervision – retail and authorisations at the FCA said:
“The FCA welcomes NewDay’s proactive approach to ensuring it treats customers fairly. The FCA expects all firms to consider the fairness and impact of their default fees and charges. It is important that firms, where they identify concerns in relation to their fees, disclose those concerns to the regulator, proactively act on those concerns and keep the regulator informed.
“NewDay has disclosed this matter to us and has committed to putting things right for its customers. Where firms identify unfair overcharging within their policies and systems we would encourage firms to undertake similar initiatives.”
Under the FCA’s rules, a firm can only attempt to impose debt recovery costs on a customer if a formal agreement or contract between the firm and customer allows this to occur. If a firm is contractually permitted to impose default charges on a customer, then the amount of these charges and the circumstances in which they may be imposed should be stated in the agreement. Charges imposed on customers in default or arrears must be no higher than the costs the firm incurs as a result of the customer’s failure to maintain their obligations.
NewDay specialises in providing credit cards to ‘near prime’ customers seeking to improve and repair their credit records. It also provides co-branded cards for well known retail brands, including Debenhams, Arcadia Group, House of Fraser and Laura Ashley.
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