£1.3bn payout for mis-sold insurance ‘ridiculous’
Hamish Ogston, who owns a majority stake in CPP, responded in robust language after action was announced by the Financial Conduct Authority over the scandal involving 13 banks and credit card firms.
The lenders, together with CPP, have agreed to offer redress for mis-sold credit card and identity theft protection policies. But Mr Ogston declined the opportunity to express regret.
Barclays, HSBC, and Royal Bank of Scotland are among those to have signed up to the scheme which will cost up to £1.3bn. The scandal involved 23m policies and saw customers given misleading and unclear information about the insurance. CPP has already been fined £10.5m over the affair.
But Mr Ogston was in combative mood after the compensation announcement, which will see millions of customers contacted by the company. He described the £1.3bn quoted as “bollocks” and a “ridiculous figure”, adding: “There’s never been a compensation redress scheme in history where it’s been 100% [success rate].”
He suggested the scale of overall compensation paid out would in reality be much smaller than the headline figure.
The entrepreneur, who stood down from York-based CPP’s board in June but holds a 57% stake in the business, accused the Financial Conduct Authority of “sensationalism, by quoting a huge 100% rate”.
When asked if he was sorry Mr Ogston — who made a reputed £120m when the company was floated in 2010 — refused to comment.
The mis-selling scandal ran from 2005 to 2011, during which time CPP sold 4.4m policies and renewed almost 19m. Of the 4.4m, it is believed that only around 300,000 were sold directly by CPP, while lenders were responsible for around 4.1m.
Many customers were sent new bank cards which they had to activate by going through a CPP call centre, where they were offered insurance.
The Financial Conduct Authority found that the insurer “greatly exaggerated” the risks and consequences of identity theft and criticised it for offering cover of up to £100,000 for cards even though they were already covered by their banks.
It said card protection policies of £30 a year and identity protection at £80 a year were “widely mis-sold”, and that the banks and credit card companies “must share the blame for putting things right”.
Compensation will depend on the type of policy and how long it was held. Those entitled to it will receive the amount paid for their policy since Jan 14, 2005, plus 8% interest on any sum owed.
The scheme will need to be agreed by the majority of customers and also requires High Court approval.
Financial Conduct Authority CEO Martin Wheatley said: “We believe this will be a good outcome for customers who may have been mis-sold the card and identity protection policies.”
Shares in CPP, which was recently handed a three-year £36m funding lifeline by its lenders, plunged by a quarter on the announcement.
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