UK banks face another mis-selling scandal

The Financial Conduct Authority is preparing to set out a compensation scheme for consumers who bought identity theft and credit card protection from York-based life assistance company CPP, Sky News was first to report.

British banks will again be hit by a mis-selling scandal, which could see them lose up to £1.5bn. Around a dozen financial institutions will be affected, including Barclays, HSBC, RBS and Lloyds.

Sources cited by Sky said banks could face between £1bn and £1.5bn of fines – slightly lower than some estimates, and a fraction of the £15bn faced by banks for covering the mis-selling of payment protection insurance. The announcement will be timed to coincide with CPP’s half-year results announcement.

Under the terms of the agreement, banks that mis-sold CPP products will need to write to the affected customers to inform them they may be eligible for redress. Some of the banks involved are likely to make separate announcements to indicate their financial exposure.

CPP customers will have to vote in favour of the agreement before it can go ahead.

CPP was fined £10.5m last year by the Financial Services Authority for "widespread" mis-selling. It has since secured a £13m credit facility from its lenders, expiring in July 2016. Some of its banking business partners had also allowed it to defer £23m of commission due to them in 2014 to 2017.