Seven million people are entitled to £1.3 billion after purchasing a 'credit card and identity theft' policy through their banks that was often pointless.
ITV News Consumer Editor Chris Choi reports:
Banks and credit companies were today hit with a £1.3bn bill for mis-selling policies from the Card Protection Plan (CPP) Group:
- The CPP is a British company offering "life assistance products"
- These include protection against loss, theft and fraudulent use of financial cards, identity theft protection, phone protection insurance and travel assistance
- Its Airport Angel product gives members access to airport lounges
- Many banks sold CPP products protecting against identity theft and card fraud, but these were useless to customers because they were already covered by their bank.
- Banks received a commission for selling CPP products
- In November 2012, the CPP was fined £10.5m for the mis-selling of its products
- The CPP employs more than 1,000 people at its York base, but in March it asked staff to consider voluntary redundancy to reduce operating costs
- The firm's share price has plummeted since the FSA's probe into its products.
Customers were given "misleading" and unclear information about insurance policies by banks and credit card firms, the Financial Conduct Authority said.
"Customers bought cover that either was not needed, or to cover risks that had been greatly exaggerated," said the FCA.
The £1.3bn compensation payment for mis-selling of Card Protection Plan (CPP) policies affects two insurance products:
- ‘Card Protection’, which cost approximately £30 per year
- ‘Identity Protection’, which cost approximately £80 per year
Seven million customers, who between them bought and renewed about 23 million policies, are likely to be eligible for compensation after banks and credit card issuers reached an agreement with the Financial Conduct Authority (FCA) today.
Here's how it will work:
- Affected customers will be contacted by CPP from 29 August 2013 onwards, explaining what they can do next.
- Compensation will be available to any customer who bought or renewed the Card Protection or Identity Protection products since 14 January 2005.
- Customers will be paid 8 percent interest on the amount they are owed.
- The FCA says applying for compensation will be "a simple process", with customers asked to complete a form.
- Compensation is not expected to be paid out until Spring 2014.
- The delay is because the compensation scheme must first be voted on by customers and approved by the High Court.
Thirteen high street banks and credit card issuers have been told to pay millions of pounds in compensation to customers who were mis-sold credit card and identity theft protection.
The banks and companies affected are:
- Bank of Scotland
- Canada Square Operations Limited (formerly Egg Banking)
- Capital One
- Home Retail Group Insurance Services Limited
- MBNA Limited
- Morgan Stanley
- Royal Bank of Scotland
- Tesco Personal Finance
Major high street banks and credit card companies face a bill of up to £1.3 billion for compensating customers mis-sold CPP Group's credit card and identity theft protection, the Financial Conduct Authority said today.