Details of a compensation scheme for people mis-sold insurance products by CPP Group have been unveiled by the regulator.
Banks could have to pay out a staggering £1.3 billion to compensate victims of another mis-selling scandal – this time involving card protection and identity theft insurance.
The products were mis-sold by Card Protection Plan (CPP) Group, which is also putting money into the compensation fund.
What happened then
Between January 2005 and March 2011, CPP sold 4.4 million policies which raked in £354 million. And a further 18.7 million policies were renewed to the tune of £656 million.
Customers were put through to CPP when they called a number to activate their debit or credit card. The company then attempted to sell card protection, at £30 a year, despite the fact the cards were already covered by the banks.
They also sold the identity theft insurance, at £80 a year, but regulator the Financial Conduct Authority (FCA) has ruled that CPP “greatly exaggerated” the risks of ID fraud during the sales process.
The following banks and card issuers have voluntarily signed up to provide the compensation as they introduced customers to CPP:
- Bank of Scotland Plc
- Barclays Bank Plc
- Canada Square Operations Limited (formerly Egg Banking Plc)
- Capital One (Europe) Plc
- Clydesdale Bank Plc
- Home Retail Group Insurance Services Limited (which owns brands including Argos)
- HSBC Bank Plc
- MBNA Limited
- Morgan Stanley Bank International Limited
- Nationwide Building Society
- Santander UK Plc
- Royal Bank of Scotland Plc
- Tesco Personal Finance Plc
And the insurance products were known by a number of names, depending on who was selling them. Here’s a full list of those names:
- Card Guard (offered by HSBC)
- Card Safe (offered by M&S Money)
- Barclaycard Card Protection
- Barclays Cardholder Protection
- NatWest Card Protection
- Egg Emergency Cover
- Card Protection, Card Protection Plus and Commercial Card Protection (which were sold by CPP and a number of its business partners)
What happens now
However, before compensation claims can be made, the scheme must first be voted on by CPP customers, with a majority agreeing to the compensation, and then approved by the High Court.
[SPOTLIGHT]Seven million people will receive letters from CPP from next Thursday 29th August asking them to vote on the compensation package.
If the scheme is approved, compensation will be payable to anyone mis-sold these products since 14th January 2005 from next spring.
The compensation will be any money paid for the insurance products, plus 8% interest on the amount owed.
If you want to claim compensation, you’ll be sent a form to fill in. You don’t need to go through a fee-charging claims management company and they’ll be no extra benefit in doing so.
CPP was fined £10.5 million by the FCA’s predecessor the Financial Services Authority in November last year for the mis-selling.
This, and compensation payouts for policies it mis-sold directly, pushed to the company to the brink of going under. However, a new refinancing deal has allowed it to continue trading and means this compensation scheme can progress.