The tycoon whose company is accused of making millions from mis-sold insurance policies should be prosecuted, a prominent Labour MP said today.
Hamish Ogston, the multi-millionaire former boss of the insurance firm Card Protection Plan, sparked outrage when he dismissed the possibility that the scandal could result in £1.3bn worth of compensation claims as “bollocks”.
John Mann, a member of the Commons Treasury Committee, retorted yesterday: “Consumers and taxpayers will question why this arrogant man had not been prosecuted. Clearly the real ‘bollocks’ is the weakness of the law in dealing with this scandal.”
The Financial Conduct Authority has said that seven million customers who bought or renewed CPP policies over a period of six years are entitled to their money back plus 8 per cent interest, a decision which could cost the companies involved £1.3bn, if all of them put in a claim. But Mr Ogston rubbished the figure, arguing that no compensation scheme attracts a 100 per cent take up. The entrepreneur, who owns a multi-million-pound house near Harrods in Knightsbridge, London, was awarded a CBE in 2011 for “services to business”. He stood down from the CPP board in June, but owns 57 per cent of the firm, which he launched in 1980.
By 2000, his company had 5.5 million customers and controlled 80 per cent of the market. He personally made £150m when he floated it in 2010.
Last year CPP was fined £10.5m for selling insurance against credit-card theft to customers which they did not need because they were already covered by their card companies, and for overstating the risk of identity theft. Their sales pitch was that customers could cover themselves for up to £100,000 worth of losses if a card was stolen by a thief who then used it to go on a spending spree.
In some cases, new customers who had been given a number to ring to activate their card went straight through to a CPP sales operative. What they were not told is that the card providers are obliged to cover their losses, under the banking code.
Since the FCA judgement, the company has been struggling with a falling share price. Shares fell from from 20.3p to around 13p – wiping more than £13m from its stock-market value.
The compensation ruling also covers 13 credit-card providers who directed customers to CPP, with Barclays, HSBC, Santander, RBS and MBNA being the most exposed.
Between January 2005 and March 2011, CPP amassed £845m from customers taking out or renewing card insurance policies. Lenders were paid fees of up to 60 per cent for referring customers to CPP.
The scandal is just the latest of a series to hit the reputations of the high-street banks and major lenders. However, the sum involved is a fraction of the pay-outs from the payment-protection insurance scandal, which have hit £15bn, or the £11bn paid to people wrongly advised to switch from company pension schemes to personal pensions based on stock-market performance.