In its quarter trading update today the owner of Argos, Home Retail Group, said it is shelling out £30m to compensate customers of its financial services arm.
The company has launched a review after finding out that is charged customers on the "buy now, pay later" scheme late payment fees by mistake, affecting up to 10 per cent of Argos card customers.
Customers who were wrongly charged are expected to get up to £100 each. The money Argos has set aside to deal with the error is equivalent to nearly all the profits made from its financial services division in the last five years.
The money adds to Argos' £17m bill for customer compensation paid last year, a sum that includes PPI compensation.
George Salmon, equity analyst at Hargreaves Lansdown, said: "Given the pending takeover, the board of Sainsbury's will probably be shaking their heads at the news, though in the grander scheme of things the sum involved is not enough to derail the deal.
"There were some encouraging signs at Argos, in particular the strong increase in digital sales. The proposed takeover by Sainsbury's now looms large in the future of both companies, and could deliver significant benefits, however the outcome of two challenged businesses joining forces still remains very uncertain."
Argos reported its strongest sales growth in nearly two years this morning as it gears up to its takeover by Sainsbury's later this year.