Customers in line for £1.3bn ID Theft compensation windfallBanks reach agreement with FCA for redress package
22 August 2013
Customers who were mis-sold card and identity theft cover will be eligible for a share in up to £1.3bn compensation as Card Protection Plan Limited (CPP), high street banks and credit card providers sign up to redress scheme.
Customers who signed up to 'Card Protection' at a cost of around £30 a year, and 'Identity Protection' which cost around £80 a year were widely mis-sold by CPP.
The Financial Conduct Authority (FCA) has reached an agreement with CPP and 13 high street banks and credit card providers, that means compensation can be paid to customers who were mis-sold CPP's Card Protection and Identity Protection policies using a simple claim form.
If you think you've been mis-sold a policy, read our consumer rights guide on how to complain about mis-sold identity theft insurance for more information on the new scheme
What if I was mis-sold a policy?
Seven million customers, who bought and renewed about 23m policies, will be contacted by letter by CPP from 29 August 2013 onwards. The letter will give customers information on how the process will work and what to do next. The amount of compensation for each customer will depend on the type of policy owned and for how long.
Before any compensation can be paid the scheme needs to be voted in favour of by customers, and approved by the High Court, so compensation is not expected to be paid out until Spring 2014. Customers will be invited to vote in a second letter from CPP in the Autumn.
Policies 'widely mis-sold'
Back in November 2012, CPP was fined £10.5m for giving customers misleading and unclear information about the policies. This led to customers buying cover that was not needed, or to cover risks that had been greatly exaggerated.
The products were sold directly to customers by CPP, but high street banks and credit card issuers also introduced millions of customers to CPP. According to the FCA, their involvement in the scheme 'reflects the fact they introduced customers to CPP's products and so must share responsibility for putting things right'.
Which? executive director, Richard Lloyd, said: 'ID theft insurance and card protection policies are poor value for money and many customers were mislead about the benefits, so it's good to see the Financial Conduct Authority (FCA) taking action against CPP.
These policies were widely mis-sold so the FCA should name other firms they are investigating, and make it as easy as possible for people to get their money back'.
The proposed scheme
The FCA has established a 'Scheme of Arrangement' which should provide a simple process for customers who were mis-sold to make a claim for redress.
The scheme is open to all customers who bought or renewed the Card Protection or Identity Protection product since 14 January 2005 from CPP, or a bank or a card issuer from the banks below. It is also open to customers who bought or renewed Identity Protection from CPP by telephone since the same date.
As claims are made the firms will pay money into the scheme. As well as CPP the following banks and credit card providers have voluntarily agreed to be part of the scheme:
- Bank of Scotland
- Barclays Bank
- Canada Square Operations Limited (formally known as Egg Banking)
- Capital One
- Clydesdale Bank
- Home Retail Group Insurance Services Limited
- HSBC Bank
- MBNA Limited
- Morgan Stanley Bank International Limited
- Nationwide Building Society
- Santander UK
- The Royal Bank of Scotland
- Tesco Personal Finance