Plastic card and identity theft insurer, Card Protection Plan Limited (CPP), has been fined £10.5 million by the Financial Services Authority (FSA) for mis-selling insurance products.
The regulator found widespread mis-selling of CPP’s two main UK products between January 2005 and March 2011 as follows:
CPP sold its card protection product by emphasising that customers would benefit from up to £100,000 worth of insurance cover when this was not needed because customers were already covered by their banks; and
CPP overstated the risks and consequences of identity theft during sales of its identity protection product.
The company has agreed to pay redress of around £14.5 million to consumers, with the focus on its direct sales customers rather than those introduced by partners such as High Street banks.
During the period in question, CPP sold 4.4 million policies, generating £354.5 million in gross profit, and renewed 18.7 million policies, generating income of £656.5 million.
Following FSA intervention in early 2011, the firm has improved its renewal process and extended the cooling off period during which customers can change their minds about buying products, from 14 days to 60 days.
Tracey McDermott, the FSA’s director of enforcement and financial crime, comments: “We have highlighted before our concerns about low cost insurance that offers little or no value to the customer.
“This case shows the action we will take if our warnings are not heeded”.