A company that provides store cards for big brands like Topshop, Dorothy Perkins, House of Fraser and Miss Selfridge is about to shell out £4million in refunds to its customers.
Turns out that Newday, the company that runs the cards, found they had been hitting their customers with unfair card charges and delays in processing transactions and now they’re paying out.
People with store cards from Debenhams, Laura Ashley, Wallis, Burton Menswear, Evans, Outfit and Topman might also be affected, along with the Marbles, Aqua and Opus credit cards. Around 3% of customers will be due money back after the company looked at the fairness of its charges and had a rethink. But what prompted this rethink?
Maybe it's something to do with the government’s Financial Conduct Authority’s new powers over the UK’s 50,000 consumer credit firms - which has triggered a load of internal reviews across the industry.
NewDay has said that it’s going to shape up its policies, including cutting down on when default fees could be charged and setting up alerts to help customers to avoid fees by making quick payments.
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How will I know if I’ve been unfairly charged?
NewDay say they’ll write to you in the next two or three months if you’re affected and put credit on your account. Alternatively, you may get a cheque for the money owed or receive compensation payments, depending on your circumstances.
A spokesman added: “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.”
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Are store cards a terrible idea?
“Would you like to take out a store card and get 10% off your purchase today?" is a phrase you might have heard while handing over your payday cash for a pair of too-tight dancing shoes, but as consumer finance expert James Daley says, stores can whack up their interest rates much higher than other credit cards. He explains:
“The way retailers sold them was by offering money off if you take one of the cards out. They end up being an expensive way to borrow and often don’t have things like interest-free periods. Like all credit products, they can be used responsibly if you pay the balance off as quickly as you can. The time to be making a decision to borrow money is not when you are at a till, in a shop, buying shoes.”
Debt Advice charity StepChange said that 1 in 8 of their clients have store card debt. Mostly people have more than one card, owing on average £1,063 on those cards. The Money Advice Service found that14% of the over-indebted people in the UK have a store card that they do not pay off in full each month.
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This article was first published on Wednesday March 30th, 2016
