The FCA has launched a redress scheme for consumers who were missold card or identity protection products from Card Protection Plan.
The regulator says the maximum redress bill will be £1.3bn.
CPP was fined £10.5m in November 2012 for widespread misselling of its card protection and identity protection policies and was ordered to pay redress to consumers.
Since then the FCA has been working with CPP and 13 banks and card issuers on a redress scheme, which was announced in August 2013.
Claims forms will be sent to eligible customers this month, and must be returned by 30 August. The first compensation payments are expected to be made from late March.
FCA director of supervision Clive Adamson says: “The FCA has worked closely with CPP, the banks and card providers to set up this consumer redress scheme. This is an important example of firms voluntarily coming together to meet our expectation that consumers get a fair deal.”
CPP card protection cost about £30 a year, while identity protection cost about £80 a year. The redress scheme covers sales and renewals of these products since January 2005.
The following banks and credit card issuers have agreed to be part of the scheme and will provide the money to pay redress: Bank of Scotland, Barclays, Canada Square Operations (formerly Egg Banking), Capital One, Clydesdale Bank, Home Retail Group Insurance Services, HSBC, MBNA, Morgan Stanley, Nationwide, Santander, Royal Bank of Scotland and Tesco Personal Finance.
The FCA has used its powers to bind the Financial Ombudsman Service to the scheme. This means that consumers who are eligible for the scheme can complain to the FOS, but it can only assess their claims and award compensation according to the rules of the scheme.