vanquis banking group

Vanquis Banking Group has warned income and pretax profit in 2024 will be substantially lower than expected, as a result of a deluge of car finance complaints, despite not being one of the lenders under investigation, in further evidence of the disruption the FCA review of motor finance is causing to the sector.

Shares in the Yorkshire-based group, which acquired vehicle finance business Moneybarn in 2014, have slumped 34% since its trading update this week in which the lender also announced it is slashing its dividend.

Vanquis said that while the group is not a subject of the FCA's review of historical motor finance commission arrangements and sales, it “has been experiencing significant levels of third party complaint submissions.”

Reviewing these complaints is causing an increase in administration costs and the lender stated that while the “vast majority” are not upheld, it warned “the associated costs are likely to materially impact the group's profitability in 2024”.

The lender also said it is “exploring proactive legal steps to address this situation”.

The latest update says Vanquis Group's expectations for its 2023 results have not changed since its earlier trading update at the beginning of February, with adjusted profit before tax (PBT) for FY 2023 expected to be £25m.

However, in marked contrast to the February announcement that the lender was “looking forward” to delivering “attractive and sustainable profit growth and returns”, Vanquis said its adjusted PBT for 2024 is now expected to be well below the anticipated £75.1m, resulting in a low single digit adjusted return on total equity (ROTE).

Income is also expected to be materially lower than the £538.3m previously published as the market consensus for 2024.

Complaint costs

Complaints brought to the Financial Ombudsman Service (FOS) and passed on to a lender generate a £750 case fee payable by the firm regardless of outcome, in addition to any redress payments that need to be made if the complaint is upheld.

The rise in consumer complaints about car finance follows the publication of a claims tool on the MoneySavingsExpert website, and the site’s founder, consumer champion Martin Lewis, has said he believes the scale of car finance mis-selling could match that of the PPI scandal of the 1990s.

Lewis says over a million people have logged complaints using the tool since its launch at the beginning of February.

The MoneySavingsExpert website suggests the FCA “will set up some type of mass-scale redress scheme”, although it does also caution “there's a small chance it'll change its mind and say this is a damp squib”. It advises consumers to log a claim now rather than risk being time-barred based on any future FCA decision.

The website includes a list of firms which it says have told it they have never used discretionary commission arrangements and so are outside the scope of the FCA investigation. It states: “We can't independently verify this, but it'd seem unlikely that regulated firms would make such a blanket statement unless it was true (and if it's not true, we'll formally complain to the FCA about misleading info).”

Moneybarn is one of 23 firms listed as not worth making a claim against on this basis.

“The current arrangements are certainly not going to discourage an epidemic of risk-free speculative claims that lack merit made by people who have not suffered any harm, at the expense of lenders businesses and the price customers will pay in future,” noted Edward Peck, CEO of Asset Finance Connect.