Argos Owner Faces £30m Bill For Overcharging

Argos owner Home Retail Group is setting aside at least £30m in compensation after admitting thousands of store card customers were overcharged.

The company has launched a detailed review into the issue, which relates to "buy now, pay later" plans for some of the retailer's 1.5 million store card holders who were charged excess fees for late payments.

Chief executive John Walden said it affected up to 10% of Argos card customers.

They are expected to receive compensation of up to £100 each and Home Retail (Other OTC: HMRLF - news) will write to affected customers in the next few weeks.

The group said it had found that "a more extensive customer redress programme" would be required than first thought when the issue was discovered earlier this year, increasing the likely cost by about £30m.

It (Other OTC: ITGL - news) said its financial services division had discovered it "had erroneously collected excess fees in relation to the late payment of amounts due from certain customers".

Mr Walden said: "It's not a material number of customers and not a material amount of money per customer.

"But for each customer it matters. We will address it and treat customers fairly."

Home Retail Group had disclosed in its results for the year to the end of February that it had set aside £17m for customer redress, but this mainly related to payment protection insurance (PPI) mis-selling - a separate, long-running scandal across wider financial services that has mainly affected banks.

The new disclosure came in a first quarter trading statement showing that Argos' like-for-like sales grew by just 0.1% in the 13 weeks to 28 May.

The group blamed poor weather and falling prices for the stuttering performance as well as "cannibalisation" of sales from its own stores as it added new space.

Mr Walden said the planned £1.4bn takeover of the group by Sainsbury (Amsterdam: SJ6.AS - news) 's was on course to complete in the third quarter of the calendar year. Competition bodies are currently weighing whether to launch an inquiry into the deal.

The chief executive added: "Given the natural distraction that a transaction such as this can be for our colleagues, on top of the recent sale of Homebase, I am particularly pleased with our performance in the quarter."