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Billions set aside for new mis-selling scandal

Billions set aside for new mis-selling scandal

Category: Credit cards

Updated: 22/08/2013
First Published: 22/08/2013

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Millions of people who were mis-sold card protection and ID fraud products could be in line for hundreds of pounds in compensation.

The Financial Conduct Authority (FCA) announced today that it has reached an agreement with the insurance company - Card Protection Plan Limited (CPP) - and 13 banks that will pave the way for redress to be paid to customers who have been mis-sold the products, either through a bank or CPP directly, since January 2005.

Seven million customers were sold CPP's card and identity products, which cost each policy holder around £30 and £80 per year respectively.

Yet the FCA said in many of the cases, customers had been "given misleading and unclear information about the policies".

At the end of last year, the FCA's predecessor, the Financial Services Authority, fined CPP a record £10.5 million for its involvement in the mis-selling.

But the latest development has seen banks and credit card providers agree to provide up to £1.3 billion towards a new scheme that will be set up to provide compensation to those mis-sold the insurance.

Which banks have signed up?

The 13 banks and credit card providers that have agreed to be part of the scheme are:

  • Bank of Scotland
  • MBNA Limited
  • Barclays Bank
  • Morgan Stanley Bank
  • Canada Square Operations Limited (formerly Egg Banking Plc)
  • Nationwide Building Society
  • Capital One
  • Santander UK
  • Clydesdale Bank
  • Royal Bank of Scotland
  • Home Retail Group Insurance Services Limited
  • Tesco Bank
  • HSBC

The CPP insurance products were known by a number of names, depending on who was selling them, including:

  • Card Guard (offered by HSBC)
  • Card Safe (offered by M&S Money)
  • Barclaycard Card Protection
  • Barclays Cardholder Protection
  • NatWest Card Protection
  • Egg Emergency Cover
  • Card Protection, Card Protection Plus and Commercial Card Protection (which were sold by CPP and a number of its business partners)

However, The CPP compensation scheme must first be voted on by customers and approved by the High Court, and the FCA said it doesn't expect the first compensation payments to be made until next spring.

What does this mean for you?

If you were sold one of the above mentioned products after January 2005 you could be in line to receive compensation.

  1. Make sure to check old documents and paperwork to find out whether you took out any CPP products.
  2. If you can't find any documents, then you should check credit and debit card statements. CPP says that if you purchased one of its products it should say CPP on your statement.
  3. CPP will start sending letters to those affected from 29 August onwards. The letter will explain in more detail how the compensation scheme works and what you should do next.
  4. Those affected will also be invited by CPP to vote on whether they are in favour of the compensation scheme.
  5. This means that if you've changed address since taking out one of these policies you should contact CPP directly to update your details.
  6. If the majority of customers vote in favour of the scheme, then they will need to fill out a simple claim form. CPP should keep you up to date on the proceedings.
  7. The FCA has also made it clear that there is no need for customers to use a claims management company.

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.