CPP fined £10.5 million for mis selling

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FSA/PN/102/2012
15 Nov 2012
The Financial Services Authority (FSA) has issued its joint largest retail fine of £10.5 million to Card Protection Plan Limited (CPP) for mis-selling insurance products.
CPP has also agreed to pay redress and estimates that around £14.5 million will need to be paid to affected customers, but this could change depending on how many customers respond to CPP's contact exercise. CPP has estimated that the total costs of the FSA's investigation will be £33.4 million which includes the fine, redress and the costs associated with the investigation. The fine is for all types of sale made by CPP while the focus of the redress exercise is CPP's direct sales.
The FSA found widespread mis-selling of CPP's two main UK products between January 2005 and March 2011. CPP failed to treat its customers fairly and did not provide clear information to its customers:

• CPP sold its Card Protection product by emphasising that customers would benefit from up to £100,000 worth of insurance cover - when this was not needed because customers were already covered by their banks; and
• CPP overstated the risks and consequences of identity theft during sales of its Identity Protection product.

CPP sold Card Protection and Identity Protection through its own sales channels, or through a partner, such as a high street bank, which introduced its customers to CPP. Card Protection cost about £35 a year while Identity Protection cost about £84 a year. In total, CPP sold 4.4 million policies and generated £354.5 million in gross profit.
In the period in question, 18.7 million policies were renewed which generated an income of £656.5 million. Following FSA intervention in early 2011 CPP has improved its renewal process and extended the cooling off period during which customers can change their minds about buying the product from 14 days to 60 days.
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.
The FSA found that CPP's sales process focussed on sales, revenue and commercial objectives at the expense of treating customers fairly. The FSA's investigation revealed that:

• CPP sales agents were encouraged to be overly persistent in persuading potential customers to purchase the products even after they had made it clear that they did not wish to buy them;
• CPP gave its sales agents targets for successfully dissuading customers who contacted CPP to cancel their policies;
• CPP did not prevent sales agents telling customers to buy the products on the basis that customers could cancel them during the cooling-off period; and
• CPP renewed and took payments from customers without reminding them when it did not have current addresses and could not send renewal documentation.

Customers generally do not need insurance for fraudulent transactions on lost or stolen credit and debit cards because they are not liable for unauthorised card payments - apart from in exceptional circumstances. However CPP continued to sell Card Protection by emphasising this insurance aspect of the product.
CPP also failed to control its affairs responsibly and effectively. This is because it was aware that significant issues about its sales and compliance processes had been raised by the FSA but it failed to take sufficient action to deal with them.
Tracey McDermott, the FSA's director of enforcement and financial crime, said
"This is a serious case, one that has warranted our joint largest retail conduct fine and generated a sizeable bill for consumer redress.
"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% discount on its fine. Without the discount, the fine would have been £15 million.
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.










http://www.fsa.gov.uk/library/commun...2012/102.shtml

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Re: CPP fined £10.5 million for mis selling

And good riddance to them.

[enaid]

Re: CPP fined £10.5 million for mis selling

Am diggin me dads paperwork out I cancelled this earlier this year as it no use at all to him, going to write off for a refund.

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Re: CPP fined £10.5 million for mis selling

CPP be writing to customers it believes have been affected, but not until discussions between itself, the FSA and the banks have concluded. A special fund is expected to be created for this purpose.
Customers are being urged to contact CPP or their bank to claim. Customers can only claim for policies taken out between January 2005 when the FSA started regulating general insurance, and March 2011 when the FSA first started dealing with CPP over the issue.




http://www.guardian.co.uk/money/2012...-investigation

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Re: CPP fined £10.5 million for mis selling

How do I know if I had a mis-sold CPP policy?

Most of the people affected by the announcement took out a CPP policy via their bank. Banks that sold the policies include Santander, Barclays, HSBC, RBS/NatWest and building society Nationwide. Halifax and Lloyds did not sell it. Bank of Scotland did but only before 2005 – the official start date for claims against CPP.
A number of the banks "introduced" their customers to CPP by affixing a sticker to credit or debit cards sent to customers. This prompted the customer to call a number, belonging to CPP, either to activate the card or confirm receipt of it. When the customer called CPP also 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.
Other firms, including HSBC and Nationwide, did sell the products but not through card activation. It is believed, though no one was available at the banks or CPP to confirm this, that some of the policies may have been sold as part of a packaged current account.
CPP sold a small amount of products directly itself. It has set aside £14.5m in compensation for these, but the bill could be higher if other customers come forward.
Will I be contacted if I have been mis-sold a CPP policy?

The FSA and CPP are currently in talks with the banks about how any redress will be paid, so it is unclear whether your bank will write to you to inform you that you are affected or not. Given the fact the banks have to do this with PPI claims, the hope is that they will be similarly proactive.
If you took out a policy via CPP it will be writing to you in the coming months to tell you you were mis-sold the product and are entitled to claim.
In any case you could start doing some research. If you bought directly from CPP the two mis-sold products are called card protection and identity protection. Card protection was the most widely sold and most people took it out because it meant CPP would deal with cancelling and replacing cards if they were lost or stolen.
However, both products were often rebanded by the banks that sold them. So, for example, HSBC called the card protection product card guard, M&S Money called it card safe, and First Direct sold it as First Direct card protection.
If I did take out a policy pre-2005 can I pursue them?

The reason for the January 2005 start date is that this is when the FSA 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.
The FSA has indicated that if you renewed an existing policy after January 2005 this would be counted as a new sale and you would be liable for compensation.
Are 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 are 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.
How much money will I get back?

CPP says this detail is still to be worked out with the FSA. However, if the redress is the same as that for PPI you should expect to get back all the premiums you paid into the policy from the date you took it out to the date you closed the policy (or up until the date you make the claim if you are still paying into it), plus 8% interest.



http://www.guardian.co.uk/money/2012...ing-revelation