Britain’s banks face a bill of 1.3 billion pounds to compensate millions of customers who were mis-sold credit card and identity protection insurance,regulators said today,in the latest blow to the scandal-hit sector.
The Financial Conduct Authority (FCA) said in a statement that it had agreed a compensation package with policy provider Card Protection Plan Limited (CPP),as well as 13 banks and credit card issuers.
Among these was Barclays,HSBC and Royal Bank of Scotland,as well as Lloyds subsidiary Bank of Scotland.
Card holders were mis-led into spending about 30-80 pounds a year on insurance,the watchdog said,spotlighting another case of sharp practice in the British financial sector which has been damaged by a number of scandals in recent years.
The cost of the compensation works out at up to the equivalent of USD 2.0 billion or 1.5 billion euros.
The companies also comprise Canada Square Operations (formerly Egg Banking),Capital One,Clydesdale Bank,Home Retail Group Insurance Services,MBNA,Morgan Stanley,Nationwide Building Society,Santander and Tesco Personal Finance.
“The FCA has reached an agreement with CPP and 13 high street banks and credit card issuers that will pave the way for redress to be paid to customers who were mis-sold CPP’s Card Protection and Identity Protection policies,” the regulator said in a statement.
“Seven million customers,who between them bought and renewed about 23 million policies,will soon receive a letter from CPP giving more information on the process. The redress bill could be up to 1.3 billion pounds,” it added.
The mis-selling scandal ran between 2005 and 2011,during which time CPP sold 4.4 million policies and renewed almost 19 million.
Of the 4.4 million policies,it is believed only around 300,000 were sold directly by CPP,while lenders were responsible for around 4.1 million.