Regulator the Financial Conduct Authority (FCA) has reached an agreement with several firms to provide redress to consumers mis-sold Card Protection Plan's (CPP) Card Protection and Identity Protection policies.
This follows the mis-selling of 23 million policies to seven million customers. Those customers will now receive a letter from CPP explaining the process with a redress bill of up to £1.3bn.
The insurance products, ‘Card Protection’, which cost approximately £30 per year and ‘Identity Protection’, which cost approximately £80 per year were widely mis-sold by CPP, resulting in a £10.5m fine in November 2012. Customers were given misleading and unclear information about the policies so that they bought cover that either was not needed, or to cover risks that had been greatly exaggerated. As well as CPP selling directly to customers, high street banks and credit card issuers introduced millions of customers to CPP.
The agreement includes 13 high street banks and credit card issuers, namley Bank of Scotland (part of Lloyds), Barclays, Canada Square Operations, Capital One (Europe), Clydesdale Bank, Home Retail Group Insurance Services, HSBC, MBNA, Morgan Stanley, Nationwide, Santander, RBS and Tesco Personal Finance.
However, while an agreement has been reached with all the parties, the Scheme must first be voted on by customers (who are the Scheme’s creditors) and approvedby the High Court before redress can be paid. Of the customers who vote, a majority will need to vote in favour of the Scheme for this to happen.
This means redress itself is not expected to be paid out until Spring 2014. The time between now and then will be spent seeking Court approval of the Scheme and ensuring CPP customers’ voices are heard.
Martin Wheatley, chief executive of the FCA, commented:
We have been encouraged that, working closely with the FCA and despite their different business needs, a large number of firms have voluntarily come together to create a redress scheme that will provide a fair outcome for customers. This kind of collaborative and responsible approach is a good example of how firms are taking more responsibility and helping – step by step - to rebuild trust.
We believe this will be a good outcome for customers who may have been mis-sold the card and identity protection policies. Subject to CPP’s customers approving the scheme, these policy holders will be able to claim a full refund of premiums with interest.