Seven million people across the UK are set to be refunded for mis-sold credit card and identity protection policies, at a total cost of £1.3 billion.
The Financial Conduct Authority (FCA) has revealed that it has reached an agreement with Card Protection Plan Limited (CPP) and 13 high street banks and credit card issuers to compensate consumers who were wrongly sold CPP’s products.
Though the refund amount will depend on the type of policy owned and the length of time it was held, the average customer is set to receive £185.
The compensation scheme will be open to anyone who bought or renewed CPP’s card protection product since January 14 2005, either directly from the company or through a bank or card issuer participating in the redress initiative.
The 13 high street banks and credit card issuers that have voluntarily agreed to be part of the scheme and offer the funds needed to reimburse consumers are as follows:
- 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
When offered, the product had many different guises, including HSBC Card Guard, Barclaycard Card Protection and Egg Emergency Cover, and cost consumers around £30 per year, though the redress exercise is also open to anyone who bought or renewed CPP’s identity protection cover, at a cost of £80 a year.
Last November, CPP was fined £10.5 million by the Financial Services Authority, the FCA’s predecessor, for exaggerating the risk of identity theft and persuading customers to buy insurance cover that many of them already had.
The CPP refund is not expected to be paid out until spring next year, with the intervening period used to seek court approval and listen to customers’ cases.
Martin Wheatley, chief executive of the FCA, said it is a “good outcome” for the customers who were mis-sold the card and identity protection policies. Subject to CPP’s customers approving the scheme, these policyholders will be able to claim a full refund of premiums with interest.
“Subject to CPP’s customers approving the scheme, these policyholders will be able to claim a full refund of premiums with interest,” he said.
“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.”
The scheme will be promoted in the coming weeks and months in a series of adverts in the national newspapers, which will be paid for by CPP, the banks and the credit card issuers involved.
Any customer affected will be contacted by CPP after August 29th with details of the scheme, after which they will be able to vote on whether they favour the exercise.
All customers who are adjudged to be due compensation will be entitled to the amount they have paid for their policy since January 14th 2005, in addition to 8% interest on the amount owed, minus any money paid out by the policy.
The process of contacting customers will begin imminently.