Britain's banks face a new £200m bill for mis-selling after the Financial Services Authority (FSA) yesterday fined the country's biggest provider of card and identity theft insurance a record £10.5m.
CPP widely mis-sold its two main UK products to 4.4 million people for six years up to March 2011. It has agreed to pay around £14.5m in compensation to some 300,000 people to whom it sold directly.
The compensation bill for the remaining 4.1 million customers who were introduced to CPP by card issuers including Royal Bank of Scotland, Santander, HSBC and Barclays will be met by these banks and may reach £200m.
The banks and CPP are still negotiating with the FSA over how they will settle the majority of the mis-selling claims and how much it will cost.
Santander last month said it had included a provision for card protection mis-selling among total "redress" provisions of £232m in its third quarter.
Most of CPP's sales were based on the stickers put on new credit or debit cards telling customers to ring a number to "activate" the card or confirm delivery.
These calls went through to CPP call centres where staff then tried to sell them card protection and identity protection. The FSA said call centre staff were "over persistent" and used scripts which not only misled customers but also outrightly lied.
In one case the script said identity theft had "risen 40 per cent in the last year" when industry data showed it rose 1 per cent.
Tracey McDermott, above, head of enforcement and financial crime at the FSA, said: "This is a serious case, one that has warranted our joint largest retail conduct fine and generated a sizeable bill for consumer redress."
CPP customers paid around £35 a year for card protection and £84 for identity protection. As well as the 4.4 million new policies sold over the six years, another 18.7 million policies were renewed.
This is the latest in a long line of scandals to hit the sector.
The FSA said while CPP's products were 'relatively inexpensive', they were sold widely and CPP encouraged agents to be overly persistent.Reuse content