Archive article – kept for reference purposes
The financial regulator, the Financial Services Authority, has fined CPP £10.5 million for mis-selling card protection and identity fraud policies. These policies supposedly provided you with benefits if your credit or debit cards were stolen or if someone carried out identity fraud against you. But the FSA found there was ‘widespread mis-selling’ of these policies over a six year period. If you were mis-sold, you may be due compensation.
What did CPP do?
I’ve read the FSA’s fine notice, where it sets out why it’s fining the company and it makes shocking reading. The FSA found that CPP mis-sold credit card protection and identity fraud protection policies over a period of six years (between January 2005 and March 2011).
- During that time it sold 4.4 million policies and renewed 18.7 million. It took £188.3 million in policies from sales and £656 million from renewals. During that time it made £354 million in pre tax profit and £79.1 million in net profit (paying £48 million in dividends to its parent company in that time).
This is what the FSA found:
- CPP automatically renewed policies unless customers cancelled after receiving a renewal pack.
- Sales agents tried to sell the products on the basis of benefits that customers would never, or very rarely, need. This was mainly up to £5,000 for transactions on a lost or stolen card, when, unless you’ve been grossly negligent, you’d only generally be liable for a maximum of £50.
- Sales agents tried sell products on the basis of a benefit that customers would never need. This was a ‘benefit’ of up to £50,000 — or £100,000 in some cases — for transactions made after you’d cancelled your cards).
SAVVY TIP: If your card is lost or stolen and you inform the card provider, you’re not liable for any transactions after that, so this part of the cover was worthless.
- CPP took payments from up to 5% of customers where they didn’t have up to date address details. Customers couldn’t (and didn’t) agree to the renewal, but CPP took the money anyway under its automatic renewals policy.
- CPP took payments from cards other than the ones they’d originally been given details of. If CPP tried to take a renewal payment from a card that had been cancelled or that expired, it would take a payment from one that the customer had registered with them only for emergency card cancellation purposes.
SAVVY TIP: Although CPP did write to customers to tell them what they were going to do, not surprisingly the FSA found this was unfair.
- CPP took payments from cards registered for emergency cancellation where customers had cancelled direct debits because they didn’t want to renew.
How did CPP sell its policies?
Many of CPP’s policies were sold as ‘introduced sales’ while others were sold directly. Introduced sales meant that the bank issuing the credit or debit card ‘introduced’ customers to CPP. This often happened when credit or debit cards had a sticker on the front of them with a telephone ‘activation number’, which was actually a number for CPP’s call centre, not the bank or credit card provider.
Banks/card providers that worked with CPP as an introducer included RBS/NatWest, Santander and Barclaycard.
SAVVY TIP: The FSA is discussing with CPP, banks and credit card providers how customers may be compensated who were sold to indirectly (ie after they were introduced by their bank).
CPP says it changed its practices and stopped advising customers to buy its policies in 2008. After that date it simply gave customers the information and they could decide whether or not to buy it. But the FSA disagreed and said it was still giving advice.
How did these policies work?
Before March 2011 (when the company stopped selling policies that had an insurance element in them, which meant they’d be regulated by the FSA) CPP sold two types of policy: card protection and identity protection.
Credit card protection cost £35 a year:
- CPP received £34.40 of that premium and paid up to 60% of it to banks and credit card companies for introducing CPP to its customers.
- 60p went to pay for the policy benefits (including a ‘one stop’ phone number, the benefits described above which people didn’t need, emergency loans or cash).
Identity theft protection cost £84 a year:
- CPP received £68 and paid a percentage (up to 50%) to banks and credit card companies for introducing CPP to its customers.
- £16 went to pay for the policy benefits including access to credit reports, online monitoring of a customer’s personal information and registration with a fraud detection service, out of pocket expenses and the cost of a new passport or driving licence.
SAVVY TIP: If someone commits ID fraud against you, you need only contact one of the three credit reference agencies (Equifax, Experian and Call Credit) as their Victims of Fraud teams will liaise with the other agencies. You can register directly with a fraud detection organisation called CIFAS for £20 a year if you want to.
What happens next?
CPP says it will contact all customers who may have been mis-sold a CPP policy directly. It hasn’t given any timescale for this. The FSA is currently discussing sales and compensation with banks where customers have been introduced by them.
CPP has issued a lengthy statement in which it says it acknowledges there were “significant historic failings” and says that the “identification of practices below the required standard are deeply regrettable”.
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