Provider behind Debenhams and Topshop store cards to refund 180,000 customers
Over 180,000 customers of credit card firm NewDay, will be refunded over £4 million after the firm admitted it unfairly charged customers.
NewDay provides a mixture of store cards and credit cards for the likes of Debenhams, House of Fraser, Topshop and Topman, as well as credit cards for the likes of Aqua and Marbles, which are typically used by those with a poor credit score.
- See 0% balance transfers, money transfers and purchases for the best credit card buys.
But about 3% of customers are due redress of £20 each on average after the company found that default fees and other charges triggered additional charges - “in a small number of circumstances” - in a way NewDay considered unfair.
In addition, delays between transactions being made and these being detailed on accounts, also meant some customers incurred additional charges.
Regulator, the Financial Conduct Authority (FCA), says when NewDay discovered the issue in 2015 it “immediately” proposed to make changes, including the removal of some of the circumstances when default fees may be charged, as well as setting up tailored alerts to enable customers to avoid incurring fees by making prompt payments.
Jonathan Davidson, director of supervision of retail and authorisations at the FCA says: “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.”
- See how to Climb out of debt in 2016.
I’m a NewDay customer. Am I affected?
Affected customers will receive redress for charges applied between 1 April 2014 – when the FCA took over regulation of the consumer credit market – and the 1 January 2016 – when changes were made to NewDay’s charging practices.
The FCA says affected customers don’t need to take action as NewDay will contact them over the next two to three months – this includes trying to contact those who are no longer customers.
However, NewDay’s redress scheme doesn’t cover charges applied before 1 April 2014, so if you think you were unfairly charged, contact it via its normal customer services routes.
The firm says it will consider these complaints on a case-by-case basis.
How will I receive redress?
In most cases customers will receive a credit on their account, while a limited number will receive a cheque for the redress owed.
The FCA says some may also receive additional compensatory interest payments depending on their individual circumstances.
What does NewDay say?
A spokesperson from NewDay says: “In 2014 we commissioned an independent review into how we charge fees across our credit card products.
"Our review identified a small number of circumstances in which some customers were charged fees that they did not anticipate or were not clearly understood and we concluded that these fees should no longer be charged.
"Consequently, from 1 January 2016 none of our customers have been charged these fees. Further, we decided to refund those customers affected from 1 April 2014.
"The average refund is £20 and we are contacting these customers directly. We have kept the FCA fully informed throughout the process.”
Your credit score is a three-digit number (ranging from a low of 300 to a high of 850) calculated from the information in your credit report. Your credit score enables lenders to determine how much of a credit risk you are. Basically, a low credit score indicates you present a higher risk of defaulting on your debt obligations than someone with a high score. If you have a low credit score, any products you successfully apply for will carry a higher rate of interest commensurate with this risk.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.