CPP mis-selling: what you need to know

Card providers have agreed to compensate customers who were sold policies between 2005 and 2011. Here are the key facts

How did this start?

When you were sent a new or replacement credit card or debit card, it often carried a telephone number to register or activate it. Frequently, that number took the caller straight to CPP, which used the opportunity to offer card protection and/or identity protection to the customer. Some banks made it clear to their customers that they were talking to CPP, others didn't.

What did they charge me?

The card protection policies typically cost £30 a year, while the identity protection policies cost about £80.

Who sold it to me?

CPP were the underlying provider of the policies, but it was sold through a wide range of banks, credit card companies and retailers. The FCA says the companies that will have to compensate customers are Barclays, Bank of Scotland, Egg, Capital One, Clydesdale Bank, Home Retail Group Insurance Services (which includes Argos), HSBC, MBNA, Morgan Stanley, Nationwide, Santander UK, RBS and Tesco Personal Finance.

Does that mean Lloyds TSB and Halifax aren't involved?

Broadly, yes. Bank of Scotland, now part of the Lloyds group, sold CPP policies until 2003 and renewals after that. But neither Lloyds TSB or Halifax sold CPP policies. It looks like Barclays, the biggest player in the card market through Barclaycard, will take the biggest hit.

What was wrong with these policies?

The Financial Conduct Authority (FCA) says customers were given misleading and unclear information about the policies. The policies they bought were either not needed, or to cover risks that had been greatly exaggerated. Critics say that the £30 card protection policies only cost 30p to manage and received tiny numbers of claims. It fined CPP £10.5m in November 2012 and has since then been working on a programme of compensation for customers.

How many of us are due compensation?

The FCA says there were seven million customers of CPP, who between them bought and renewed about 23 million policies, between January 2005 and March 2011, the period when the FSA said mis-selling took place.

How much is it worth?

You will be entitled to the amount you have paid for their policy since 14 January 2005, less any money paid out by the policy, plus 8% interest on the amount owed. In total, the compensation will be around £1.3bn, says the FCA. Divided between seven million customers, that suggests around £185 per customer in compensation.

How do I get it?

Right now you don't have to do anything. Any affected customer will be contacted by CPP from 29 August 2013 onwards (ie from next week). The letters will explain in more detail how the compensation scheme works and what people can do next. The odd thing is that it will involve a vote. The letter in the autumn will ask you to vote on whether you are in favour of the deal.

Could it fall through?

The FCA says: "Of the customers who vote, a majority will need to vote in favour of the scheme for this to happen." In other words, if 95% of people don't bother to vote, but the 5% who do vote more in favour than against, then it is approved.

When will I get the money?

Once the vote goes through and the Scheme of Arrangement is formally approved by the high court, customers will then have to complete a simple claim form. The current thinking is that the money will start to be paid out from spring 2014.

Those PPI claims companies are going to love this

Maybe not. The FCA said customers do not need to use a claims management company to help them claim redress. Nevertheless, expect those annoying claims texts to start arriving soon.

What if I was sold one of these before 2005?

The reason for the January 2005 start date is that this is when the FSA (now the FCA) started regulating general insurance sales. This means it cannot enforce any redress due to customers sold a policy before this time. This does not mean you cannot claim for it, but it could be more tricky – and almost impossible if you don't have the paperwork.

Either way, you should still approach CPP or your bank and say you want to make a claim. If they have details of your policy but refuse to pay out on it you could take your case to the Financial Ombudsman Service. If neither you or CPP have details of your policy you will struggle to claim.

Why are the banks paying out when it was CPP at fault?

The FCA says: "The involvement of the banks and credit card issuers reflects the fact that they introduced customers to CPP's products and so must share responsibility for putting things right."

Were these policies always rubbish?

Some elements of the CPP products could be viewed as beneficial, including the single number service that cancelled and replaced all lost or stolen cards. It is the insurance elements that were almost always a waste of money. The card protection product was offering £100,000 of insurance cover if you were the victim of fraud because of a stolen card – but banks cover you for this anyway. Banks will also reimburse you in most cases of identity theft, rendering the identity protection insurance a largely useless product.

Contributor

Patrick Collinson

The GuardianTramp

Related Content

Article image
Banks braced for exposure to CPP mis-selling investigation

High street banks in discussion with the FSA over sale of credit card protection products

Lisa Bachelor and Jill Treanor

15, Nov, 2012 @12:19 PM

Article image
CPP approves compensation to seven million people mis-sold card insurance
Insurer votes through payment scheme, which now goes to court for approval before customers are given the opportunity to claim

Hilary Osborne

09, Jan, 2014 @3:48 PM

Article image
Whistleblower wins 13-year campaign against HSBC
Thousands of customers will be compensated for excessive credit card charges thanks to dogged efforts of 59-year-old Nicholas Wilson

Rupert Jones

20, Jan, 2017 @1:17 PM

Article image
Banks to compensate customers over CPP mis-selling scandal
FCA to announce about a dozen financial institutions, including all major high street banks, have signed up to scheme

David Batty

21, Aug, 2013 @11:48 PM

Article image
CPP shares fall after announcement of mis-selling compensation
Shares drop 36% to 15p after FCA agrees money to be awarded to credit-card users mis-sold identity protection policies

Patrick Collinson

22, Aug, 2013 @6:33 PM

Article image
Backlog of financial ombudsman cases grows to 30,000
Whistleblower tells MPs number of claims not yet allocated case officer has risen threefold since 2016

Miles Brignall

22, Jan, 2019 @1:26 PM

Article image
Q&A: CPP mis-selling revelation
What you should do if you think you were mis-sold a card protection or identity protection policy on your credit card

Lisa Bachelor

15, Nov, 2012 @3:56 PM

Article image
Bank outages should be limited to two days, say regulators
Guidance comes after IT glitches at TSB and Visa caused chaos for millions of customers

Patrick Collinson

05, Jul, 2018 @3:59 PM

Article image
Consumer groups welcome move to ensure finance firms put customers first
Mortgages, pensions, investments and loans must have duty to customer, says UK’s financial watchdog

Shane Hickey

14, May, 2021 @4:39 PM

Article image
Barclays bank tops list of customer complaints
Complaints about banks and insurance firms have fallen, says regulator, but Barclays and Lloyds TSB came bottom of class

Hilary Osborne

16, Oct, 2013 @11:25 AM