Vanquis almost vanquished

Shares in Vanquis Banking Group plunged by 50% to a record low this week. Investors in the specialist bank were spooked by a sharp rise in complaints from customers, mainly about credit cards, but also car loans, says Ben Martin in The Times.

Vanquis argues that the “vast majority” of the complaints against it were not upheld, but it admits that the cost of handling the “flood of grievances” has forced it to issue a profit warning. It has also admitted that a revamp of the company will dent sales this year.

This is just the latest setback that has seen the company’s market value shrink from £5bn, when it was a FTSE 100 member, to £159bn.

The complaints about its subprime credit card business are especially serious because it accounts for all the group’s pre-tax profits in the past two years, says Lex in the Financial Times. They also come at a time when CEO Ian McLaughlin has been heralding a “new dawn” for Vanquis.

More than a million claims have now been registered against the broader car-finance industry on consumer champion Martin Lewis’s website since the start of February. Most of this onslaught comes from professional claims firms, prompting some uncomfortable questions for the Financial Conduct Authority, the City regulator, which will need to decide “whether it wants the UK’s subprime consumer credit segment to survive”.

Most of the complaints, which cost lenders £750 each even if not upheld, have come from just one claims management firm, says Ben Marlow in The Telegraph. This raises questions about the role of such “shameless ambulancechasers”. But it’s hard to feel sympathy for a bank criticised for pushing high-interest loans on people who often can’t repay them. And how could Vanquis have been so “completely blindsided”, when last month it said trading had been “in line with expectations”?