[BUG] "Use custom API key: true" ignored — Claude Code still authenticates via Google Vertex AI (Windows 11)

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Environment:

• Claude Code version: 2.1.45
• OS: Windows 11
• API provider shown in Status: Google Vertex AI

Bug Description:
When using Claude Code under an organization‑managed account configured for Google Vertex AI, toggling “Use custom API key” to true in Settings → Config does not switch the API provider to Anthropic API.

Even when:

• ANTHROPIC_API_KEY is set as a Windows User environment variable

• “Use custom API key” is explicitly set to true

Claude Code continues to authenticate exclusively via Google Vertex AI, as shown in Settings → Status.

Expected behavior:
Setting "Use custom API key: true" should override the Vertex AI
provider and use ANTHROPIC_API_KEY for authentication.

Actual behavior:
Provider remains Google Vertex AI regardless of the Config setting.

Workaround:
Temporarily removing ANTHROPIC_VERTEX_PROJECT_ID from the session
environment (Remove-Item Env:ANTHROPIC_VERTEX_PROJECT_ID in
PowerShell) forces Claude Code to use ANTHROPIC_API_KEY correctly.

Root cause hypothesis:
ANTHROPIC_VERTEX_PROJECT_ID environment variable takes priority
over the "Use custom API key" Config setting. The Config toggle
appears to have no effect when Vertex env vars are present.

Suggested fix:
When "Use custom API key" is explicitly set to true, it should
take precedence over all provider environment variables, including
ANTHROPIC_VERTEX_PROJECT_ID.

What Should Happen?

Expected behavior:

One of the following should occur:

1. If org policy prevents switching providers:

• The UI should disable or annotate “Use custom API key”
• Or display a clear message indicating the provider is locked by org policy

OR

1. If switching is allowed:

• “Use custom API key: true” should override Vertex AI and use ANTHROPIC_API_KEY

Actual Behavior

• Provider remains Google Vertex AI
• “Use custom API key” toggle has no visible or functional effect
• No warning or explanation is shown to the user

Additional Findings

• Account has "penguinModeOrgEnabled": true
• Vertex AI provider selection appears to be enforced server‑side
• Local config files and environment variables cannot override this
• When Google Application Default Credentials expire, Claude Code fails with:

API Error: Could not load the default credentials
*Re‑authenticating with:
gcloud auth application-default login
resolves the error

Suggestion Improvements

• Disable or annotate “Use custom API key” when provider is locked by org policy
• Improve error messaging when Vertex AI credentials expire
• Clarify provider precedence rules in documentation and UI

Error Messages/Logs

Steps to Reproduce

Setting "Use custom API key" to true in Config does not switch
the API provider from Google Vertex AI to Anthropic API.

Even with:

• ANTHROPIC_API_KEY set as a Windows User environment variable
• "Use custom API key" toggled to true in Settings → Config

Claude Code continues to authenticate against Google Vertex AI
(confirmed in Settings → Status: "API provider: Google Vertex AI").

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.45

Platform

Google Vertex AI

Operating System

Windows

Terminal/Shell

PowerShell

Additional Information

_No response_