Customers of banks and credit card companies could be paid up to £1.3bn in redress over mis-selling of identity theft protection products from Card Protection Plan Ltd, which was slapped with a heavy fine by the regulator last year.
The Financial Conduct Authority has agreed with CPP and 13 high street banks and credit card issuers for redress to be paid to as many as 7m customers for a total of abou 23m policies. The regulator will be writing to each customer to advise on a course of action.
Among the 16 financial institutions who will compensate customers is Barclays. FTAdviser sister title the Financial Times highlighted embarrassment for the bank over the affair, as the bank’s new chief executive Antony Jenkins was chief executive of the group’s credit card business Barclaycard during the period the mis-selling took place.
The affected financial institutions 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
• Tesco Personal Finance Plc
One expert told the FT that the Identity Protection product was wholly unnecessary to begin with because any losses from identity theft are borne by the banks rather than the individual customer.
In November 2012 FCA predecessor the Financial Services Authority issued its joint largest retail fine of £10.5m to CPP for mis-selling Card Protection and Identity Protection insurance products costing about £30 per year.
The company had sold its Card Protection product by emphasising that customers would benefit from up to £100,000 worth of insurance cover when this was actually already being provided by banks. It also overstated the risks and consequences of identity theft during sales of its Identity Protection product.
Martin Wheatley, chief executive of the FCA, 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.”