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
More top news
Thousands of pounds has been raised for a Syrian refugee after a photograph of him selling pens to feed his daughter went viral.
The bank has apologised to customers after issues thought to be with the Bacs system leave many without their salary.
An axe-wielding journalist butchered and ate a dead squirrel on live television last night, prompting an outcry on social media.