An agreement has been reached between the Financial Conduct Authority (FCA) and Card Protection Plan Limited (CPP) that will enable customers who were mis-sold CPP’s insurance products to be redressed, the FCA announced today.
FCA reaches agreement with CPP to repay customers mis-sold Card Protection and Identity Protection policies
Credit card issuers and 13 high street banks, who introduced their customers to CPP’s Card Protection and Identity Protection policies, will also be part of the redress scheme, which could cost up to £1.3bn. Each customer will be redressed depending on the type of policy (or policies) owned and the length of time it was held.
The FCA said that seven million customers who bought and renewed around 23 million policies, will soon receive more information on the process from CPP.
In order to ensure that customers are treated fairly, the banks and credit card issuers have agreed to establish a ‘Scheme of Arrangement’, subject to the approval of the High Court. Through the Scheme, customers who were mis-sold policies will be provided with a simple form to make a claim for redress. When claims are made the firms will pay money into the Scheme to cover outgoing redress payments.
Customers were given misleading and unclear information about insurance products that included ‘Card Protection’, costing around £30 per year, as well as ‘Identity Protection’, for which customers were charged approximately £80 per year. The policies were either unnecessary or to covered risks that had been greatly exaggerated, which resulted in CPP being fined £10.5m in November 2012.
High street banks and credit card issuers that were also involved in the mis-selling have voluntarily agreed to be part of the Scheme and will provide the money needed to pay redress. They include: Bank of Scotland Plc (part of Lloyds Banking Group), Barclays Bank Plc, Canada Square Operations Limited (formerly Egg Banking Plc), Capital One (Europe) Plc, Clydesdale Bank Plc (part of National Australia Group Europe), Home Retail Group Insurance Services Limited, HSBC Bank Plc, MBNA Limited, Morgan Stanley Bank International Limited, Nationwide Building Society, Santander UK Plc, The Royal Bank of Scotland Plc and Tesco Personal Finance Plc.
Although an agreement has been reached with all the parties, the Scheme must first be voted on by customers (the Scheme’s creditors), as well as being approved by the High Court, before redress can be paid. A majority vote in favour of the Scheme by the customers is necessary for the Scheme to go ahead, which means redress is not expected to be paid out until Spring 2014. The Scheme is open to all customers who bought or renewed the Card Protection product since 14 January 2005 from CPP, a bank or a card issuer who are participating in the Scheme and customers who bought or renewed Identity Protection from CPP since 14 January 2005 by telephone.