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FSA fines Card Protection Plan Limited £10.5m for ‘widespread misselling’

FSA Front Door 480

The FSA has fined Card Protection Plan Limited £10.5m for “widespread misselling” of credit card insurance.

The regulator says the fine relates to the sales process adopted by CPP for its two main UK products between January 2005 and March 2011.

In particular, the FSA says CPP sold its Card Protection product by emphasising that customers would benefit from up to £100,000 worth of insurance cover. This was not needed because customers were already covered by their bank.

CPP also overstated the risks and consequences of identity theft during sales of its Identity Protection product.

Card Protection cost about £35 a year while Identity Protection cost about £84 a year. The FSA says in total CPP sold 4.4 million policies, generating £354.5m in gross profit.

FSA director of enforcement and financial crime Tracey McDermott says: “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.”

In addition to the FSA fine, CPP has agreed to pay redress and estimates that around £14.5m will need to be paid to affected customers.

CPP estimates the total costs of the FSA’s investigation will be £33.4m 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.

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. So the total cost of the FSA’s action is less than 10% of the gross profit.

    I bet the Directors of CPP will still get a bouns. So why would the FSA’s actions stop someone else doing this in the future?????

  2. We're All Doomed!! 15th November 2012 at 9:41 am

    Anon – The 10% figure is CPP’s estimate – and I, for one, wouldn’t trust a word they say based on the culture of shafting clients that they were so obviously cultivating!

  3. generating £354.5m in gross profit.

    The FSA has fined Card Protection Plan Limited £10.5m

    looks a good deal, probably less than their tax bill!

    If the FSA was really wanting to deal with this the fine would have been !00m!

  4. Anonymous | 15 Nov 2012 9:04 am

    The deterrent is the cost of the remediation exercise.

    There will be more actions to come, enforcement action takes years and these sales practices continued in many firms for a long time.

    For the positive thinking, this could even be considered a boost to the economy… not only will redress be released into shop tills but think of the contractors taken on to review files. They will be earning and spending.

    Happy Thursday everyone.

  5. The FSA says in total CPP sold 4.4 million policies, generating £354.5m in gross profit.

    CPP estimates the total costs of the FSA’s investigation will be £33.4m which includes the fine, redress and the costs associated with the investigation.

    Is it any wonder they do it then!

  6. These fines are huge, anyone that knows CPP will know they are large employer in the York area. This sort of action is almost certainly likely to lead to people losing their jobs.

  7. Since the fines will have to come from net funds it is only worth comparing them with the net profit made, whatever that was. The article talks about gross profit.

  8. I have had this insurance for many years – recommended by my Bank !
    Where do the banks stand in this matter ?

  9. Has there been any information put forward on claiming for this? I have had this cover, added on by the credit card company but I never realised I had it until after I had the card.

  10. Close the fu*king place down

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