Aberdeen Standard Investments is suing consumer loan provider Provident Financial for failing to disclose a regulatory probe into its Vanquis credit cards arm.
Aberdeen Standard is a top shareholder in Provident Financial, with a stake greater than three per cent.
Provident Financial is also the thirteenth biggest holding in the £6.6bn Woodford Equity Income fund, making up 2 per cent of the total investment.
Aberdeen has written to Provident seeking compensation for the lack of disclosure, people familiar with the matter told FTAdviser, after it was first reported in The Times.
Last month Vanquis, which offers credit cards to those with poor credit ratings, was fined £1.98m for selling so-called 'repayment option plans' that the regulator said were poorly explained. It was also ordered to compensate customers to the tune of £169m,
A letter from Aberdeen claimed Provident’s “earlier public announcements were false or misleading or, alternatively, the delay in disclosing those matters publicly was dishonest pursuant to section 90A of the Financial Services and Markets Act 2000, and the company made actionable misstatements during those investor meetings”.
Both Aberdeen and Provident declined to comment on the action yesterday.
Shares in Provident have tumbled in recent months as it has been hit with several pieces of bad news, and the company recently announced a rights issue at a nearly 50 per cent discount to market price.
The repayment option plan (ROP) was sold to Vanquis credit cardholders who struggled with managing their debt.
It allowed them 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 text message alerts relevant to their account.
But in 100 per cent of cases the FCA reviewed, Vanquis did not tell customers the true cost of the plan, and did not explain to customers that the ROP could attract interest at the card rate, which was compounded unless the account balance was paid in full at the end of the month.
Provident has been the subject of other regulatory probes including an investigation into car finance affordability at its subsidiary Moneybarn, for which it has set aside £20m for the estimated cost, according to its accounts.
