Card Protection Plan Limited fined £10m and told to pay £15m compensation for selling ‘worthless’ cover

| November 15, 2012 | 0 Comments

  • Banking giants could be next in line to be penalised over mis-selling fiasco

By
Rachel Rickard Straus

05:34 EST, 15 November 2012


|

12:46 EST, 15 November 2012

A card protection firm that sold insurance through HSBC and Santander has been hit with a multimillion-pound fine for mis-selling its products.

Card Protection Plan (CPP) has been told to pay £10.5million – the joint largest ever fine for a consumer financial business – by the Financial Services Authority. It has also agreed to shell out compensation of around £14.5million and withdraw the products.

The fine only relates to direct
sales made by the firm. The majority of sales were made through CPP’s
partners – largely high street banks – which introduced their
customers to the company.

Protection: CPP sells insurance against lost or stolen cards (pictured: CPP's website)

Protection: CPP sells insurance against lost or stolen cards (pictured: CPP’s website)

But it is now thought further action could be taken against these sales, which could see high street banks penalised for their part in the mis-selling fiasco. 

Andrew Tyrie MP, chairman of the
Treasury Select Committee, called it ‘another shocker’ adding that he
was ‘deeply concerned’ about the behaviour of CPP.

‘I will be writing to the FSA to
find out how on earth this happened’, he added, ‘and what confidence the
FSA can give us that it can’t happen again.’

The FSA slammed the card protection firm for failing to treat its customers fairly and not providing information to its customers.

It accused CPP of widespread mis-selling of its two main UK products between January 2005 and March 2011, adding that a main selling point of the products – that they would cover up to £100,000 of losses arising from fraud – offered ‘little or no value to the customer’ because banks are obliged to cover losses anyway.

It also exaggerated the risks and consequences of identity theft to potential customers in order to sell them its Identity Protection product.

CPP sold products through its own sales channels and also through high street banks, which ‘introduced’ their customers to CPP.

Some customers were drawn in by stickers attached to their new credit or debit cards sent to them by their bank.

Taking action: The FSA fined CPP £10.5 million for mis-selling products

Taking action: The FSA fined CPP £10.5 million for mis-selling products

The sticker prompted the customer to call a number – which actually belonged to CPP – to either activate the card or confirm that they had received the card.

When the customer did ring the number, CPP also used the opportunity to offer Card Protection and or Identity Protection to the customer. 

Santander used to sell the company’s
insurance via card activation, while HSBC sold its card protection product –
although not through the activation process.

Lloyds TSB and Halifax did not have a relationship with CPP.

In a damning litany of bad practices, the CPP was accused of giving its sales agents targets for convincing customers who tried to cancel their policies not to do so, and of encouraging its sales agents to be overly persistent in persuading potential customers to purchase products even after they had made it perfectly clear they did not want to buy them.

It also didn’t stop sales agents from telling customers to buy products on the basis that they could cancel them during the cooling-off period.

When it did not have current addresses of customers, CPP simply renewed their policies without permission and took payments without reminding them.

Card Protection cost about £35 a year while Identity Protection cost about £84 a year. In total, CPP sold 4.4million policies and generated £354.5million in gross profit.

Fined: Card Protection Plan Limited (CPP) was ordered to pay £10.5 million, plus compensation of around £14.5 million

Fined: Card Protection Plan Limited (CPP) was ordered to pay £10.5 million, plus compensation of around £14.5 million

CPP agreed with the FSA requirements to stop new sales of products (apart from where the insurance is sold as part of a package) and to stop trying to keep customers who call to cancel their policies. The FSA has required CPP to appoint an external ‘skilled person’ to monitor and report on its claims and complaints handling.

Tracey McDermott, the FSA’s director of enforcement and financial crime, said: ‘While CPP’s products were relatively inexpensive, they were sold widely and CPP encouraged its sales agents to be overly persistent. 

‘This exposed a very large number of customers to the unacceptable risk of buying products they did not want or need. Further, we had already warned the firm that it might be misleading customers about a feature of Card Protection from which customers were unlikely to benefit, but insufficient action was taken to rectify this.

‘We have highlighted before our concerns about low cost insurance that offers little or no value to the customer. This case shows the action we will take if our warnings are not heeded’.

CPP agreed to settle at an early stage entitling it to a 30 per cent discount on its fine. Without the discount, the fine would have been £15million.

CPP has agreed to provide an undertaking about a contract term it used which was unfair. This unfair term allowed CPP to take customer payments from another card covered by Card Protection in the event that payment could not be taken from the original card. The purpose of having multiple cards registered was to ensure that all cards were covered by the protection, but CPP used it to take payment from customers.

CPP customers with any concerns can contact the firm on 0808 156 0199.

The comments below have not been moderated.

The FSA are useless. The poor British consumer has not been MIS-SOLD anything. He has had money STOLEN from him. And to add to his woes, he’s having his email box cluttered with junk from solicitors who want to effectively steal a chunk of his compensation. This second appalling fiasco is supposed to be regulated by the Law Society and the Advertising Standards Authority. Between OFFwatt, OFFgas, OFFthis and OFFthat we have a fine bunch of quangos- with the honest Brit thinking they’re acting n his behalf.

TOMATO
,

LONDON UK,
15/11/2012 18:04

These CPP policies are a scam.
Ive tried to cancel mine but the bank still charge.
I had an issue once where i needed the cards cancelled and new ones issued.. Yet apparently my scheme didnt cover this and I needed to cancel everything manually and pay for new cards ( Even though this is meant to protect you )
Farce!

Linksus
,

Gloucesrer,
15/11/2012 18:01

Hang on a minute, PPI, CPP, and the FSA intervening raises a question. Why now? why not when they announced it? Is it illegal? Has anybody gone to jail? Will anyone be prosecuted? NO. OF COURSE NOT, it is all just a sham!

Grumpy Grandad
,

Warrington,
15/11/2012 17:54

From past 3 years, they are taking money from my account. Whenever i call them to cancel, they are simply saying my identity details are incorrect (the address which they have in the account). They definitely deserve to be fined.

Ravindra
,

London, United Kingdom,
15/11/2012 17:32

I refuse to have a credit card – just don’t trust them. Expect I will still be getting calls from someone asking if I want to “claim compensation” though.

DF
,

East Yorkshire, United Kingdom,
15/11/2012 17:30

Wonder if the DM can do a financial story. Without linking it to Santander somehow

me
,

Cheshire,
15/11/2012 17:23

As the old saying goes when it comes to companies that are within the banking industry crimes pays and the bonus no one goes to jail.

Allan
,

Lost in the NW Area, United Kingdom,
15/11/2012 17:22

The number of times over the last 15 years I have had a bank or financial company try to sell me something I don’t need must run to 3 figures -I have always said no but the number of people who have said yes have paid for worthless products must be millions- these companies are completely and utterly ruthless prey on the weakest in the community!

Ross100
,

Cardiff,
15/11/2012 17:22

These Sharks are still in business and holding the country to ransome in many ways. millions of people here in the UK are still paying the price for these Loan Sharks,and tricks they were playing 10 years ago.

Davey_Buoy
,

Chertsey, United Kingdom,
15/11/2012 17:18

I do believe there is not a headline concerning the financial services industry, the press, education, our MP’s and Parliament or the social benefit system, that would surprise me now. It seems we really are morally bankrupt nation.

the publisher
,

london, United Kingdom,
15/11/2012 17:17

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