£1.3bn to be paid out over mis-sold card products

Credit cards

The UK's major high street banks and credit card providers have agreed a compensation deal worth £1.3 billion, to be paid to the seven million consumers who were mis-sold card protection and identity protection policies.

The Financial Conduct Authority (FCA) has reached an agreement with Card Protection Plan Limited (CPP) and 13 high street banks and credit card issuers, to compensate customers who collectively bought and renewed around 23 million policies.

Card protection products typically cost around £30 a year, while identity protection products were more expensive, at around £80 a year. Both were widely mis-sold by CPP, resulting in a £10.5m fine in November 2012.

The FCA said at the time that customers were given misleading and unclear information about the policies so that they bought cover that was either not needed or to cover risks that had been hugely exaggerated.

The regulator has ordered that the banks and credit card companies set up a simple claims process – called a ‘Scheme of Arrangement' – that will ensure victims of mis-selling are dealt with speedily.

But how much consumers will receive depends on the type of policy they took out and the length of time it was held, the FCA said.

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As well as CPP selling directly to customers, high street banks and credit card issuers acted as introducers for CPP millions of customers to CPP.

The banks and credit card issuers who have agreed to the scheme are:

  • Bank of Scotland Plc (part of Lloyds Banking Group)
  • Barclays Bank Plc
  • Canada Square Operations Limited (formerly Egg Banking Plc)
  • Capital One (Europe) Plc
  • Clydesdale Bank Plc (part of National Australia Group Europe)
  • Home Retail Group Insurance Services Limited
  • HSBC Bank Plc
  • MBNA Limited
  • Morgan Stanley Bank International Limited
  • Nationwide Building Society
  • Santander UK Plc
  • The Royal Bank of Scotland Plc
  • Tesco Personal Finance Plc


Before any compensation can be paid, the redress scheme must first be voted on by customers and approved by the High Court. With this in mind, compensation is not expected to be paid until Spring 2014 at the earliest.

The scheme is open to anyone who bought or renewed the card protection policies from CPP, a bank, or a card issuer who is participating in the scheme, from 14 January 2005 (when the FCA began regulating the sale of general insurance products). It is also open to people who bought or renewed Identity Protection from CPP since 14 January 2005 by telephone.

Redress scheme

Martin Wheatley, chief executive of the FCA, said: "We have been encouraged that a large number of firms have voluntarily come together to create a redress scheme that will provide a fair outcome for customers.

"We believe this will be a good outcome for customers who may have been mis-sold the card and identity protection policies. Subject to CPP's customers approving the scheme, these policyholders will be able to claim a full refund of premiums with interest.

"To try and ensure that as many people as possible hear about the arrangements and that nobody misses out on redress, CPP, the banks and the credit card issuers have agreed to pay for a series of adverts in the national newspapers."

Affected customers will be sent a letter by CPP from 29 August 2013 onwards, explaining in more detail how the scheme works and what people can do next. In the Autumn, they will be sent voting forms to vote on the scheme itself.


Between April and June this year, the Financial Ombudsman Service said it received 247 new complaints about card protection insurance. It is finding in favour of the consumer in 76% of cases.

A spokesman said: "While card protection insurance can be useful for some people, in many of the cases we see the consumer neithger wanted nor required the cover.

"There are a number of provisions in place that provide you with some protection if your identity is stolen - so don't feel pressured into taking out an insurance policy on the spur of the moment."