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22/08/2013
Customers To Be Reimbursed Following Mis-Sold CPP Card Protection
The Financial Conduct Authority (FCA) has reached an agreement with Card Protection Plan Limited (CPP) and 13 high street banks and credit card issuers, that will pave the way for redress to be paid to customers who were mis-sold CPP's Card Protection and Identity Protection policies.
Seven million customers, who between them bought and renewed about 23 million policies, will soon receive a letter from CPP giving more information on the process. The redress bill could be up to £1.3bn with redress per customer depending on the type of policy (or policies) owned and the length of time it was held.
The FCA's primary concern throughout its work on CPP has been to ensure customers get a fair deal. To that end the banks and credit card issuers have, subject to the approval of the High Court, agreed to establish a 'Scheme of Arrangement'. The Scheme provides a simple process for customers who were mis-sold to make a claim for redress. As claims are made the firms will pay money into the Scheme to meet their outgoing redress payments.
The insurance products, 'Card Protection', which cost approximately £30 per year and 'Identity Protection', which cost approximately £80 per year were widely mis-sold by CPP, resulting in a £10.5m fine in November 2012. Customers were given misleading and unclear information about the policies so that they bought cover that either was not needed, or to cover risks that had been greatly exaggerated. As well as CPP selling directly to customers, high street banks and credit card issuers introduced millions of customers to CPP.
The involvement of the banks and credit card issuers reflects the fact that they introduced customers to CPP's products and so must share responsibility for putting things right. The refinancing arrangements recently secured by CPP were critical for the Scheme to be able to go ahead.
However, while an agreement has been reached with all the parties, the Scheme must first be voted on by customers and approved by the High Court before redress can be paid. Of the customers who vote, a majority will need to vote in favour of the Scheme for this to happen.
This means redress itself is not expected to be paid out until Spring 2014. The time between now and then will be spent seeking Court approval of the Scheme and ensuring CPP customers' voices are heard.
Martin Wheatley, Chief Executive of the FCA, commented: "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.
"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.
"Doing it this way means customers will get redress via a simple and standardised process, so we are encouraging customers to approve the Scheme when they receive their voting letters in the Autumn."
(CD/JP)
Seven million customers, who between them bought and renewed about 23 million policies, will soon receive a letter from CPP giving more information on the process. The redress bill could be up to £1.3bn with redress per customer depending on the type of policy (or policies) owned and the length of time it was held.
The FCA's primary concern throughout its work on CPP has been to ensure customers get a fair deal. To that end the banks and credit card issuers have, subject to the approval of the High Court, agreed to establish a 'Scheme of Arrangement'. The Scheme provides a simple process for customers who were mis-sold to make a claim for redress. As claims are made the firms will pay money into the Scheme to meet their outgoing redress payments.
The insurance products, 'Card Protection', which cost approximately £30 per year and 'Identity Protection', which cost approximately £80 per year were widely mis-sold by CPP, resulting in a £10.5m fine in November 2012. Customers were given misleading and unclear information about the policies so that they bought cover that either was not needed, or to cover risks that had been greatly exaggerated. As well as CPP selling directly to customers, high street banks and credit card issuers introduced millions of customers to CPP.
The involvement of the banks and credit card issuers reflects the fact that they introduced customers to CPP's products and so must share responsibility for putting things right. The refinancing arrangements recently secured by CPP were critical for the Scheme to be able to go ahead.
However, while an agreement has been reached with all the parties, the Scheme must first be voted on by customers and approved by the High Court before redress can be paid. Of the customers who vote, a majority will need to vote in favour of the Scheme for this to happen.
This means redress itself is not expected to be paid out until Spring 2014. The time between now and then will be spent seeking Court approval of the Scheme and ensuring CPP customers' voices are heard.
Martin Wheatley, Chief Executive of the FCA, commented: "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.
"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.
"Doing it this way means customers will get redress via a simple and standardised process, so we are encouraging customers to approve the Scheme when they receive their voting letters in the Autumn."
(CD/JP)
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