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Insurance company CPP hit by record FSA fine | Insurance company CPP hit by record FSA fine |
(35 minutes later) | |
Card protection company CPP faces a bill of £33.4m after being censured by the City watchdog for mis-selling insurance products. | Card protection company CPP faces a bill of £33.4m after being censured by the City watchdog for mis-selling insurance products. |
The bill includes a fine of £10.5m from the Financial Services Authority - the joint largest for a retail group - and £14.5m in compensation to customers. | The bill includes a fine of £10.5m from the Financial Services Authority - the joint largest for a retail group - and £14.5m in compensation to customers. |
The York-based group, which sold products aimed to protect people against identity theft, has apologised. | The York-based group, which sold products aimed to protect people against identity theft, has apologised. |
The FSA said sales agents were encouraged to be "overly persistent". | The FSA said sales agents were encouraged 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," said Tracey McDermott, of the FSA. | "This exposed a very large number of customers to the unacceptable risk of buying products they did not want or need," said Tracey McDermott, of the FSA. |
Risks overstated | Risks overstated |
CPP sold a card protection product, which cost about £35 a year, that was designed to cover losses if a card was lost or stolen. | CPP sold a card protection product, which cost about £35 a year, that was designed to cover losses if a card was lost or stolen. |
It said customers would benefit from up to £100,000 of insurance cover, but customers were already covered by their banks. Generally, cardholders are not liable for unauthorised card payments on lost or stolen credit and debit cards. | |
A second product was sold for £84 a year, that was designed to cover costs if the customer's identity was stolen. | A second product was sold for £84 a year, that was designed to cover costs if the customer's identity was stolen. |
The FSA found that CPP overstated the risks and consequences of ID theft when this insurance was being sold. | The FSA found that CPP overstated the risks and consequences of ID theft when this insurance was being sold. |
In total, CPP sold 4.4 million policies and generated £354m in gross profit, the FSA said. | In total, CPP sold 4.4 million policies and generated £354m in gross profit, the FSA said. |
During the period of mis-selling between January 2005 and March 2011, some 18.7 million policies were renewed, generating an income of £656m. | During the period of mis-selling between January 2005 and March 2011, some 18.7 million policies were renewed, generating an income of £656m. |
Some card providers put a sticker on new credit or debit cards sent to customers. It encouraged them to call a number, which was CPP's, in order to confirm receipt of the card. CPP then used the opportunity of the call to offer card protection insurance. | |
'Sorry' | |
The FSA investigation also found that: | |
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New CPP chief executive Paul Stobart said the company had taken steps to overhaul its practices. | |
"We are deeply sorry for the errors and wrongdoings of the past and are paying a heavy penalty through what is a large fine," he said. | |
It has adhered to a FSA request to stop sales of the insurance products, unless they are part of a package. It has also stopped trying to retain the business of customers who ring to cancel their policies. | |
Customers now have a 60-day cooling off period to change their mind over buying the insurance, compared with a 14-day option previously. | |
Details about compensation for customers are still being discussed by CPP and the FSA. |