Tesco Bank loan and credit card customers are starting to receive details about their share of the £43 million set aside by the bank due to historic paperwork errors.
The bank joins the long list of banks and building societies paying redress to customers after an investigation by the now closed Office of Fair Trading concluded that a large number of banks and building societies had not been complying with the Consumer Credit Act 1974 because they had not been providing the correct post-contractual documentation to credit customers.
Up to 175,000 customers who took out a personal loan or credit card with Tesco Bank are now set to receive a refund, averaging £228, in wrongly-paid interest and charges dating back six years. (See our Cheap personal loans guide to find the best deal for you).
During the past couple of weeks, Tesco Bank has started its redress programme, first writing to the 140,000 affected loan customers to let them know they'll receive a payout.
The remaining 35,000 credit card customers affected by the mistake will receive letters and their payout during the first six months of next year.
Under the Consumer Credit Act, lenders are not entitled to interest or arrears fees during any period that their statements don't comply with the Act. Because Tesco Bank did not comply, it will be refunding the interest and charges to customers dating back to 2008 – the date when lenders became obliged to send periodic statements to customers, which must contain specific information and wording.
Affected customers don't need to do anything as they'll receive letters and the redress cheques automatically.
If you've moved address or no longer have the Tesco Bank loan or credit card and believe you're owed redress, contact Tesco Bank. However, it adds that it has "processes in place to identify affected customers".
What's the history behind these payouts?
In March this year, the Office of Fair Trading (OFT) ordered 17 banks and building societies – which were not named – to compensate customers over their failure to comply with the Consumer Credit Act.
The action followed a string of similar errors identified by the OFT in November 2013, when it wrote to 50 banks and building societies including Barclays, Northern Rock and the Co-operative Bank. Several other banks have also instituted redress schemes, including:
- December 2012: Northern Rock Asset Management paid out £270 million to more than 150,000 customers.
- September 2013: Barclays paid out £100 million to 300,000 customers.
- October 2013: Co-operative Bank revealed that it had increased its provisions for customer redress, in part to cover "the identification of a technical breach of the Consumer Credit Act".
- August 2014: HSBC set aside nearly £218 million, though it would not confirm how many customers were affected.
What does Tesco say?
A Tesco Bank spokesperson says: "As stated earlier in the year, we have put in place a redress programme to return interest and charges to customers who did not receive documentation in line with the requirements of the Consumer Credit Act.
"This redress programme has commenced and we are writing to all of those customers affected. Customers do not need to take any action however if they do have questions they can contact us as normal."