Seven million credit card customers could receive compensation worth a total of £1.3 billion over mis-sold protection policies, the Financial Conduct Authority has announced.
CPP sold millions of credit card protection policies on behalf of banks, including the ‘Card Protection’ plan, which cost £30 per year, and the ‘Identity Protection’ plan, which cost £80 per year.
The firm was fined £10.5 million in November by the Financial Services Authority, who concluded that misleading information and scare tactics had been used to sell unnecessary policies to millions of customers.
The company was recently forced to arrange credit arrangements with some of the banks it represented (read more).
Now, it must begin sending out letters to these customers informing them of the compensation process.
13 banks and building societies, including Lloyds, Barclays, Santander, HSBC, and Nationwide, have all accepted responsibility for directing customers to CPP and will provide funds for compensation, which is expected to reach £1.3 billion in total.
Approval is required by the High Court before redress can proceed, which is likely to delay the first compensation payments until the Spring of 2014.
Tesco is among the 13 institutions that will issue compensations for referring credit card customers to CPP.
Facing Up to Responsibilities
Martin Wheatley, chief executive of the Financial Conduct Authority, said banks were demonstrating an ability to face up to their responsibilities.
"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," he said.
"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 policy holders will be able to claim a full refund of premiums with interest.
"To try and ensure that as many people as possible hear about the arrangements and that nobody misses out on redress, CPP, the banks and the credit card issuers have agreed to pay for a series of adverts in the national newspapers."
Time for Banks to Trace Victims
The news will come as encouragement to consumers who have endured resistance from banks in their complaints about PPI mis-selling practices.
It was reported last month that Deloitte, one of the PPI complaint handlers for Lloyds Banking Group, had been caught dismissing customers’ complaints in an attempt to deter them from pursuing a claim.
The clamour has led a disgruntled public to demand that banks should be made to trace victims of PPI mis-selling, rather than waiting for them to make a claim.
(In our latest blog, claims expert Gary Verschuur offers advice on how to retrace old credit policies to see if you have been mis-sold insurance, and why you should feel confident about a claim.)
Keith McDonald
Which4U Editor
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