UK Banks Face £1.3bn Bill over Mis-sold Card Insurance

on Aug 22, 2013
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iNVEZZ.com Thursday, August 22nd: Banks and credit card issuers are facing a huge bill to reimburse their clients who have been mis-sold identity theft and credit card fraud insurance. Today the Financial Conduct Authority (FCA) released a statement on its website identifying the 13 financial institutions which will have to return up to £1.3 billion to over seven million customers who were mis-sold Card Protection and Identity Protection policies.

Card Protection Plan Limited (CPP), the issuer of the 23 million policies, will have to send out letters to each affected policy holder. CPP was fined £10.5 million by the FCA for mis-selling the products in November last year.

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After CPP writes to all seven million customers, a majority of them will have to vote in favour of the compensation scheme for it to be passed on to the High Court for approval. The compensation which each policyholder will receive will depend on the type of the policy and how long the person has held it. As a general rule the reimbursement will be the sum of all premiums which the customer has paid since January 14, 2005, less any amounts paid out under the policy, plus 8 percent interest.

“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,” the FCA said.
“This was a product that no one needed to buy,” said a bank insider, as quoted by the Financial Times. “It was always totally unnecessary because any losses from identity theft are borne by the bank not the individual anyway.”

!m[FCA Agrees on Redress Package with CPP and 13 Financial Institutions](/uploads/story/5012/thumbs/pic1_inline.jpg)
Barclays, with its leading position in the credit card market, is expected to take the strongest hit. Analysts have estimated that if the market share is taken for a proxy of the mis-selling redress, the bank will be facing a bill of over £300 million. The other financial institutions that will have to pay compensation are Bank of Scotland, Canada Square Operations, Capital One, Clydesdale Bank, Home Retail Group Insurance Services, HSBC, MBNA, Morgan Stanley, Nationwide, Santander, RBS and Tesco Personal Finance.
The FCA said that redress was expected to be paid from spring next year.

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