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Credit card insurer fined £10.5m for six years of mis-selling
CPP pressured customers to take out insurance that was worthless.
by Michelle McGagh on Nov 15, 2012 at 09:53
Credit card insurance company CPPGroup has been slapped with a record fine by the City regulator for mis-selling insurance policies to the public over a six-year period
CPP (CPPG.L) has been told to pay £10.5 million in fines and pay around £14.5 million compensation to customers. The total cost to the firm of the Financial Services Authority's investigation will exceed £33 million.
Shares in the York-based company have plunged 75% this year but bounced 10% or 2.5p higher to 26.75p today as investors saw the fine drawing a line under the scandal.
Between January 2005 and March 2011, CPP sold its card protection policy by telling customers they would receive £100,000 of cover, which they already received from their banks, at a cost of £35 a year.
When selling its identity protection plan, which cost £84 a year, CPP overstated the risks and consequences of identity theft.
The products were sold through the company’s own sales channels or partners, such as high street banks, which referred customers to CPP.
CPP sold 4.4 million policies and generated £354.5 million gross profit from the sales. In the six years investigated by the FSA 18.7 million policies were renewed generating an income of £656.5 million.
The FSA found the CPP process was sales-focused and sales agents were encouraged to be ‘overly persistent’ in persuading people to purchase products even after they said they did not want them.
It also gave sales people targets for successfully dissuading customers who wanted to cancel their policies and did not prevent sales people telling customers to buy the product on the basis that they could then cancel during the cooling-off period.
The FSA found CPP renewed and took payments from customers without reminding them when it did not have current addresses and could not send renewal documents.
CPP has now improved its renewal process and extended its cooling-off period from 14 to 60 days. It has also agreed with the FSA requirements to stop new sales of products and trying to prevent customers from leaving.
The FSA said it was concerned about insurance that offered ‘little or no value to the customer’ and customers do not generally need insurance for fraudulent transactions on lost or stolen cards.
Charles Gregson, non-executive chairman of CPP, said the board ‘clearly recognises the seriousness of past failings’ and ‘is deeply sorry for any customer detriment’.
CPP chief executive officer Paul Stobart, who joined in October 2011 to develop a customer-led strategy, said ‘there were significant failings in the systems and controls environment within CPP in the UK’.
He added: ‘Many things have changed and are changing at CPP…The transformation programme covering people, customers, products and governance is well advanced.’
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