Card Insurance Mis-Selling: CPP Fined £10.5 Million

The *FSA has just announced a massive fine of £10.5 million for credit card insurance provider CPP (Card Protection Plan Limited). The fine relates to the mis-selling of two insurance products to card holders between 2005 and 2011.

 

FSA HQ, Canary Wharf, London



 During this period CPP sold around 4.4 million Card Protection and Identity Protection policies, making a gross profit of £354.5 million. The FSA ruled that CPP failed to provide clear information about the policies and did not treat its customers fairly.  






Specific mis-selling practices identified by the FSA included:-

• The Card Protection Product offered by CPP was an unnecessary expense to customers already covered by their banks
• The risks and consequences of identity theft were overstated

This is one of the largest penalties ever imposed by the FSA (Financial Services Authority, regulator of the financial services industry in the UK).  In addition to the fine, CPP will have to recompense all the customers who were affected.  The FSA estimate that this will amount to a further £14.5 million.  Add to that the costs of the FSA investigation, and the final bill will probably amount to £33.4 million.

Since the FSA investigation CPP has made changes to the way it sells its products, including improving its renewal process and extending the ‘cooling off’ period. New Chief Executive Paul Stobart said:
'We are deeply sorry for the errors and wrongdoings of the past and are paying a heavy penalty through what is a large fine...The next steps for the team are to complete the transformation programme and to rebuild our business and our reputation in the market'.

* Note:

The FSA, or Financial Services Authority, will be replaced by the Financial Conduct Authority and Prudential Regulation Authority in 2013. The Financial Services Bill currently undergoing parliamentary scrutiny is expected to receive Royal Assent in late 2012 or early 2013, subject to the parliamentary timetable.