Banks Involved In New Insurance Scandal
Similar to the PPI scam of recent years, Insurer CPP alongside 13 banks and credit card issuers have had to put £1.3 billion aside in order to repay millions of consumers who have been miss-sold CPP credit card insurance policies. The Financial Conduct Authority made an announcement, further piling on the embarrassment for the banks following a long list of past insurance-selling scams and scandals, causing the banks to have to set aside billions in order to pay back the customers that were misled. More than £10 billion has been paid back to consumers for miss-sold PPI claims, and that number continues to grow by the day. The CPP are unable to cover all the compensation costs without help. All at-fault parties have agreed to a voluntary scheme of arrangement, which is the first of its kind from the FCA. This arrangement will take the stress out of the claims process, making it simpler and more streamlined for the claimant. It will also eliminate the need for claims management cases who were handling a large number of PPI claims.
The FCA said: “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 involvement of the banks and credit card issuers reflects the fact that they introduced customers to CPP’s products and so must share responsibility for putting things right.” CPP reported that it had suffered a £2.6 million loss from the first half of 2013, compared to a £4.4 million profit in 2012. They have said that their priority is to achieve the best outcome for customers. By 10:10am this morning, the company had suffered a share drop of more than 25%, settling at 15p. Barclays are one of the big banks that are involved in this latest scam. They said: “Without the lender’s agreement to pay compensation, CPP would not be able to meet its financial obligations, which would not be in the interest of our customers.”
The CPP has agreed to a £36 million refinancing agreement. However, this is nowhere near enough to cover the likely bill. Jeffries International analyst Joseph Dickerson said: “I expect similar blanket agreements for compensation in the future, but I do not expect this deal to have a material impact on the banks’ earning or capital.” Britain has a long history of miss-selling products to consumers, going all the way back to the 1980s when pensions and endowment mortgages were miss-sold. The FCA has a remit to protect consumers, and a line has to be drawn. The FCA fined CPP £10.5 million in November last year for miss-selling. The payments for these miss-sold credit card insurance policies aren’t due until spring 2014. You will be able to claim for sales all the way back to January 2005.
James Savery, 22 August 2013