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CPP and Card/Identity Protection – FAQs

Posted on Friday, 23rd August 2013 by

If you have seen or heard the news in the past 24 hours, it is likely that you have heard of the latest mis-selling scandal to hit the UK banks.

This time the product concerned is referred to as either Card Protection or Identity Protection, and is ostensibly a form of insurance to repay the money lost through identity fraud, if you become a victim.

However, as the statutory protection afforded to cardholders is generally sufficient to protect against identity fraud, the banks who sold this product – and its provider, CPP (Card Protection Plan Ltd) – are now facing compensation claims from customers who were sold a product they did not need.

You may have heard Paul Stubbs, litigation lawyer at Edward Hands & Lewis Solicitors, on the Shelagh Fogarty show on BBC Radio 5 Live on Thursday, August 22nd – skip to the eight-minute mark for the first of his contributions.

What is Card Protection?

The product itself – which you may have been sold as ‘Card Protection’ or ‘Identity Protection’ cover – promises a range of protections for cardholders, and was sometimes also sold as a standalone insurance against identity fraud.

It consists of six main features:

  1. A central telephone number via which you could cancel all of your existing cards, in the event of losing them all at once.
  2. A maximum of £5,000 of protection against fraudulent use of a card before it is reported stolen.
  3. A maximum of £100,000 of protection against fraudulent use of a card after it is reported stolen.
  4. A maximum of £1,000 of protection against calls made on your bill using a stolen mobile phone.
  5. Emergency cash and loans for cardholders whose cards are lost while overseas.
  6. An optional policy extension to cover the cost of replacing lost keys.

Do I need Card Protection?

Generally speaking, it is very unlikely that most customers will have needed the Identity Protection policy that was sold to them – and extremely unlikely that the few potentially beneficial features will have been worth the cost.

The financial protection against fraud is built into the regulatory system for the banks, meaning most customers would only ever have been likely to benefit from the easier admin of having a single number to call to cancel their cards.

How much does Card Protection cost?

This is a further bone of contention – the price of the Card Protection policy itself was generally just a few pence per year, but referral and admin fees charged on top, which went directly to the banks or to CPP as profit, took the cost to the consumer up to the £20-30 range.

How was Card Protection sold?

The FSA found that Card Protection policies were inappropriately sold – not only in the sense that they were not needed, but also in that the risks of identity fraud were often exaggerated by sales staff.

CPP also encouraged policyholders to keep their policies, even when they had specifically contacted CPP to cancel their cover – something the company promised to stop doing when the FSA first reported on this issue in November 2012.

How long has this been an issue?

The first FSA report – and our first blog post on this topic – came in November 2012, and we have been working with clients ever since then to ensure people get the financial redress to which they are entitled.

It is only now that the newly formed FCA, the body that replaces the FSA, has announced a redress scheme agreed with CPP and the 13 banks involved in the scandal – which has brought the subject to the media’s attention in a big way.

Is this another PPI?

This situation is somewhat different from PPI, which the banks were less proactive about dealing with; that led to a large number of ‘claims management firms’ springing up to handle complaints, which in turn contributed to the total industry cost of the scandal.

In many cases, it appears that no third parties will need to be involved in handling Card Protection claims (including both claims management firms and solicitors).

“PPI took the financial community as a bit of a surprise, and people had a very close eye on what would happen from there, but I suspect there will be people in the industry that knew that this [Card Protection] mis-selling had taken place and were probably waiting for a report, just as the one that we now see from the FSA, to determine what the extent of that might be.”

– Paul Stubbs, speaking on BBC Radio 5 Live

Which banks are involved?

A total of 13 banks are believed to have mis-sold Identity Protection to their customers:

  • 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

You may also have been sold a policy directly by CPP.

In general, policies were sold to cardholders when they phoned their bank to activate a new card, while some standalone Identity Protection policies were sold that were not directly linked with a credit card.

When were policies sold?

Between January 2005 and March 2011.

The FSA announced in November 2012 that CPP had specifically agreed to stop sales of new products, and to stop encouraging existing customers to renew their policy, if they called to cancel.

Card Protection in numbers:

  • 13 banks and card providers involved
  • 7 million affected customers
  • 23 million policies in total
  • £1.3 billion expected redress bill
  • CPP fined £10.5 million (Nov 2012)
  • CPP expected to pay £14.5 million in direct compensation (Nov 2012)

The redress scheme

The four-stage redress scheme is as follows:

  1. From August 29th 2013, CPP to contact policyholders with information.
  2. A majority of customers must vote on whether the scheme should proceed (this is a legal requirement, and a majority vote must be achieved).
  3. If a majority vote is achieved, the High Court must approve the scheme.
  4. If approved, CPP to contact policyholders again with an offer of compensation.

At this final stage, affected customers would need to return a completed claim form to CPP before a stated deadline.

If the scheme fails to proceed beyond any one of the four stages, the whole issue may need to be revisited; assuming all goes smoothly, payouts should begin in spring 2014.

What am I entitled to?

The most basic entitlement, if you were mis-sold your policy, is to receive your premiums back in full, and this potentially totals several hundred pounds per customer.

In this instance, it appears that you will also receive statutory interest on top of that amount, charged at 8% – which is substantially more than you would have been likely to make on the same funds, had they been placed in a savings account over the same period.

However, payouts are not expected to begin until spring 2014, due to the delays introduced by gaining legal approval for the redress scheme, and the administrative process of contacting customers.

What should I do?

You may not need to do anything now, as CPP or your bank should contact you – just be aware of the likely timescales involved, as this is a large legal issue that must follow the correct procedures before compensation can be awarded.

“You can, of course, contact a solicitor, but I suspect what will happen in this matter is that, because of the issues we’ve seen with PPI, the banks are very alive to the pitfalls of not dealing with this properly. The matter is due to go before the High Courts to gain approval for a compensation scheme – that will happen after August – and if that goes ahead, then there will be claim forms to applications, and they will simply fill in that claim form, and it will be dealt with as a process.”

– Paul Stubbs, speaking on BBC Radio 5 Live

The exception to this could be if your contact details have changed since you took out your policy, meaning CPP or your bank might not be able to get in touch with you about your right to receive compensation.

If this is the case, you may need to contact them proactively – you should be able to do this yourself, but if you are unsure, or if there are any other potential legal issues that you are aware of relating to your Card Protection plan, we are still taking enquiries from substantial numbers of clients on this topic.

How can those affected find out more now?

We have included useful links at the end of this article, giving readers access to more information from first-party sources; in general, those affected should be OK to simply wait for a letter from their bank, while the FCA is the primary source for general information about the redress scheme, and we will continue to keep a close eye on this issue at EHL.

“They should certainly be alive to the internet information; there’s a very good website (http://www.fca.org.uk/) that’s set up by the FCA, which used to be the FSA, that conducted the report, and they’re giving good detail as to what the stages will be. There’s only four stages to the compensation recovery plan.”

– Paul Stubbs, speaking on BBC Radio 5 Live

Useful Links:

(External links will open in a new tab/window)

Original FSA announcement (Nov ’12)
http://www.fsa.gov.uk/consumerinformation/firmnews/2012/cpp-fined

Our original blog post (Nov ’12)
http://www.ehlsolicitors.co.uk/mis-sold-card-protection-by-cpp-or-your-bank/

FCA compensation announcement (Aug 22nd ’13)
http://www.fca.org.uk/news/compensation-for-card-and-identity-protection-policyholders

FCA redress scheme announcement (Aug 22nd ’13)
http://www.fca.org.uk/news/consumer-redress-agreed-for-mis-sold-cpp-insurance

Talk to our legal team

The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.

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