It’s not the £1.3 billion compensation fund that will hurt 13 of Britain’s biggest financial institutions, as they grapple with the need to compensate clients for yet another mis-selling episode. It’s the fact that they were really rather hoping there wouldn’t be any more of those embarrassments in the first place.
But facts are facts. The Financial Conduct Authority has told 13 of Britain’s foremost banks and credit card companies that they’ll have to cough up for having directed their customers toward a rogue outfit called CPP Group, which mis-sold what has been called “totally unnecessary” card protection and identity theft insurance to as many as seven million households.
CPP itself has already been fined a record £10.5 million by the FCA for having cooked up these dodgy products, and it will be a major contributor to the new fund in addition to the 13 banks. The banks themselves are liable because they acted as intermediaries and directed their clients toward the deal.
All of which won’t surprise IFAs who’ve already been getting a battering over the things that they’ve encouraged their clients to buy in the past. But what stands out in this case is that there was never any obvious reason why the policies should have been of any use to anyone in the first place.
Consumers in Britain don’t need additional insurance against credit card fraud, because their losses are covered at source by the banking regulations and lending codes– see www.theukcardsassociation.org.uk/individual/fraud-prevention.asp, for example. But for some reason the banks got a collective fit of amnesia when they suggested these products.
Contributors to the Compensation Fund:
- Bank of Scotland
- Barclays
- Canada Square (ex-Egg)
- Capital One
- Clydesdale Bank
- Home Retail Group
- HSBC
- MBNA
- Morgan Stanley
- Nationwide
- Santander
- Royal Bank of Scotland
- Tesco
How soon will the financial burden strike? Not until next spring, says the FCA, because the schemes will have to be accepted by customers and then approved by the High Court, and the FCA said it did not expect the first compensation payments to be made until next spring. And will it be the full £1.3 billion? Nobody really knows, but on past experience that’s likely to be a starting figure.
