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Credit card insurer’s shares suspended due to FSA action

Credit card insurer CPP suspended its shares yesterday after an FSA request to carry out a past business review of the firm’s card protection and identity protection products.

The FSA has also requested that the firm scraps its automatic annual renewals policy for credit card insurance.

In a statement to the stock market, the firm warns the FSA’s actions are “disproportionate and “threaten the viability of the business”.

The Financial Times reports the FSA is set to impose one of the toughest penalties yet for misselling on the insurer.

The past business review could see CPP pay those who bought the insurance hundreds of millions of pounds in compensation dating back to the company’s inception in 2005.

The firm says: “The FSA has stated its view that some form of customer review exercise will be required. There is no certainty that these discussions will be resolved or what the scope of any review exercise that might be acceptable to both FSA and CPP might be.

These discussions are likely to last no longer than two weeks, says the firm.

A statement from the FSA says: “The FSA has serious concerns about the manner in which customers were being sold identity theft and card protection policies by the firm.”

Shares in CPP were suspended yesterday at 103p, valuing the company at £176m. It was worth £561m last February.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. I don’t know whether or not the regulation of credit card borrowing limits falls within the FSA’s remit. However, in view of the fact that no such limits appear to exist, allied to the number of people whose credit card balances are beyond their means to repay (which means that they’re effectively insolvent), one would think that it’s something that ought reasonably be on the FSA’s agenda ~ you know, to protect consumers from the consequences of reckless unsecured borrowing and all that.

    After all, the FSA has made clear its concerns about interest-only secured borrowing (mortgages), so surely shouldn’t excessive levels of unsecured borrowing (at very high levels of interest) be an even higher priority?

    And it’s hardly as if the FSA has any difficulty in obtaining authority to shape its agenda in whatever way it wishes, is it? It just announces that this is what’s going to happen from now on and everyone has to comply. Perhaps something that Martin Wheatley might care to consider, given the FSA’s statutory remit of consumer protection.

  2. Calm down Julian.

    They will start regulating your activity on the blogs.

  3. What is worrying is that the FSA have effectively closed down Homeserve and now CPP. Whatever you think of their business models it seems guilty until proven innocent, except it will all be too late for CPP which I’m pretty sure will become insolvent in a matter of weeks.

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