Insurance Regulatory eBulletin - Enforcement action

FCA fines round-up
FCA regulatory fines for 2018 now total  £3.5m. The following fines and related enforcement actions have been announced in the past month:

Vanquis Bank Limited

A fine of £1,976,000 for breaches of PRIN 6 and PRIN 7 related to treatment of existing customers (mis-selling) in the retail lending sector. The FCA also required restitution estimated at £168.7m in compensation which constitutes the amount of the charges not disclosed to customers when they bought an add-on product, called Repayment Option Plan (ROP).

Since June 2003, the ROP was offered to all Vanquis credit card customers as a way of helping them to manage their account. The ROP was a credit management tool that permitted customers to freeze their credit card account, take a payment holiday for one month per year, utilise a lifeline that would avoid late fees for one month per year, and receive SMS alerts relevant to their account.

When selling the ROP, Vanquis told customers how the product worked and what the monthly charge was but did not inform customers that the full cost of the product included an interest component where there was an end of month unpaid balance on their credit card.

The FCA ordered Vanquis to pay back the interest customers were charged on the ROP from 1 April 2014 to when customers were informed of the full cost of the ROP. Vanquis voluntarily agreed to pay back the interest customers were charged on the ROP from June 2003 to 31 March 2014, because before this time the FCA was not responsible for regulating the consumer credit market.
Guillaume Adolph A £180,000 fine and a prohibition for breaches of PRIN 5 and FIT related to benchmarks, lack of fitness and propriety and wholesale conduct in the investment bank sector.

Mr Adolph formerly worked at Deutsche Bank as a short-term interest rate derivatives trader, trading products referenced to CHF (Swiss Franc) and JPY (Japanese Yen) LIBOR. For a period of time, Mr Adolph acted as the primary JPY LIBOR submitter for Deutsche.

The FCA found that between 25 July 2008 and 11 March 2010, Mr Adolph:
  • made requests to Deutsche Bank’s CHF LIBOR Submitters to adjust their submissions to benefit Mr Adolph’s Trading Positions;
  • took his own trading positions into account when acting as Deutsche Bank’s primary JPY LIBOR submitter;
  • improperly agreed with a trader at another LIBOR panel bank to make JPY LIBOR submissions which took into account that trader’s requests.
The FCA has found that Mr Adolph closed his mind to the risk that these actions were improper. He was also knowingly concerned in Deutsche Bank’s failure to observe proper standards of market conduct. 

Information Commissioner’s Office (ICO) fines round-up
No fines affecting financial services firms have been announced in the past month by the ICO.