Deal reached between insurer CPP and 13 high street banks and credit card issuers
Britain’s biggest banks will be forced to pay up to £1.3bn to consumers who were mis-sold credit card and identify protection cover from insurer Card Protection Plan (CPP).
The FCA announced an agreement this morning with CPP and 13 high street banks and credit card issuers that will pave the way to redress seven million customers, who between them bought and renewed about 23 million policies.
These customers will soon receive a letter from CPP giving more information on the process.
The banks and credit card issuers have, subject to the approval of the High Court, agreed to establish a Scheme of Arrangement, which provides a process for customers who were mis-sold to make a claim for redress.
As claims are made, the firms will pay money into the scheme to meet their outgoing redress payments.
Mis-selling fine
CPP was fined £10.5m last November after its insurance products - Card Protection, which cost about £30 per year, and Identity Protection, which cost about £80 per year – were widely mis-sold.
The FCA’s predecessor, the Financial Services Authority, found that 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.
Banks to share responsibility
CPP and the following high street banks and credit card issuers have voluntarily agreed to be part of the scheme and will provide the money needed to pay redress:
• Bank of Scotland (part of Lloyds Banking Group)
• Barclays Bank
• Canada Square Operations (formerly Egg Banking)
• Capital One (Europe)
• Clydesdale Bank (part of National Australia Group Europe)
• Home Retail Group Insurance Services
• HSBC Bank
• MBNA
• Morgan Stanley Bank International
• Nationwide Building Society
• Santander UK
• Royal Bank of Scotland
• Tesco Personal Finance
Scheme needs approval before payout
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 approved by the High Court before redress can be paid.
This means redress itself is not expected to be paid out until spring 2014.
FCA chief executive Martin Wheatley said: “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 policyholders will be able to claim a full refund of premiums with interest.
“Doing it this way means customers will get redress via a simple and standardised process, so we are encouraging customers to approve the scheme when they receive their voting letters in the autumn.”
Customer call to action
Any affected customer will be contacted by CPP from 29 August 2013 onwards.
The scheme is open to all customers who bought or renewed the Card Protection or Identity Protection products since 14 January 2005 from CPP, a bank or a card issuer participating in the scheme.
If customers are owed compensation, they will be entitled to the amount they have paid for their policy, less any money paid out by the policy, plus 8% interest on the amount owed.
1 Readers' comment