In the latest mis-selling scandal, the FCA has announced that 13 Banks have agreed a compensation arrangement for the mis-selling of Credit Card Insurance and Identity theft protection.

The FCA concluded that some seven million people were sold this insurance on Credit Cards that was never needed. This mis-selling took place on cards between 2005 and 2011, however this does not take into account credit cards that werer renewed during this period which could take the figure upto around 18 million card holders.

£1.3bn compensation bill for mis-sold credit card insurance

The City regulator confirmed that 13 banks and financial services companies had signed up to £1.3 billion scheme.
They referred customers applying for credit and debit cards to insurance specialist CPP, which sold them policies the regulator claims were never needed. The Financial Conduct Authority today said that seven million customers, who either bought or renewed policies during 2005 and 2011 were in line for money.

Some 4.4 million policies were sold by CPP and the banks during the six years in question, but another 18 million were renewed. If customers are due compensation, they will be entitled to the amount paid for their policy since January 14 2005, plus 8pc interest on any sum owed.

Barclays, Santander, Royal Bank of Scotland, HSBC, Tesco Personal Finance and MBNA are among the 13 banks and financial institutions that face a payout. Sources last night claimed Barclays is likely to be facing the biggest hit, in a fresh blow for new chief executive Antony Jenkins. He was chief executive of Barclaycard while some of the mis-selling was taking place.

Martin Wheatley, FCA chief executive, 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 refind of premiums with interest.”

He added: “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 wil 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.”

CPP was fined £10.5 million by the FCA last year for its role in the mis-selling and has battled to stay in business ever since. Details of a new bank facility published on July 31 reveal that it will have to renegotiate the loan if more than 25 per cent of customers due compensation seek redress.

The FCA said that in most cases, the credit card and ID theft cover sold by CPP and the banks was not required, as it was already provided on the cards, or the risks and consequences of not taking the insurance out were overstated.
The compensation scheme is another body blow for a banking sector still reeling from the Payment Protection Insurance crisis.

Earlier this month the bill for PPI hit £18.4bn – double the cost of the London 2012 Olympics. A number of banks have already make provision for the cost and will not make a statement today. Lloyds Banking Group is not involved as its card and identity theft insurance was provided by another company but Bank of Scotland does fall under the scheme.

Negotiations between the regulator, the banks and CPP have been going on for months as they sought to strike a deal to recompense customers without bankrupting CPP.

The specialist insurer was thrown a £36m lifeline by its banking syndicate of Santander, Barclays and Royal Bank of Scotland last month, saving 700 jobs, after new three-year facilities were agreed. Under the terms of the agreement, the banks which sold CPP products will write to customers to inform them that they may be eligible for compensation. Alongside the banks, CPP will also have to provide compensation itself.

However, no payments are expected to be made until 2014 since the scheme must first be approved by the High Court.

Original Article : www.telegraph.co.uk/finance/newsbysector/banksandfinance


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Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim


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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.