Britain’s biggest banks will pay as much as £1.3 billion ($2 billion) to compensate customers wrongly sold insurance to cover credit-card and identity theft.
A group of 13 banks and credit-card issuers, including Barclays Plc, Lloyds Banking Group Plc, HSBC Holdings Plc, Royal Bank of Scotland Group Plc, Capital One (Europe) Plc and MBNA Ltd. will fund the redress program the Financial Conduct Authority said in a statement today. The regulator didn’t disclose the firms’ individual contributions.
Regulators said in November that CPP Group Plc, which provided the insurance for the lenders, overstated the risks and consequences of identity theft and failed to tell buyers of its card-protection product that they were already covered for losses of as much as £100,000 [$155,680] by their banks. The compensation adds to the £15.5 billion [$24.13 billion] Britain’s banks have already set aside for customers who were wrongly sold payment-protection insurance that they didn’t need.
“The involvement of the banks and credit-card issuers reflects the fact that they introduced customers to CPP’s products and so must share responsibility for putting things right,” the FCA said in the statement.
About seven million customers who bought the insurance since 2005 will be able to claim a refund on the premiums they paid plus 8 percent interest, the FCA said. The money is expected to be paid in early 2014.
Banks sold the insurance under names such as HSBC Card Guard, Barclays Cardholder Protection and Natwest Card Protection. Typically, CPP’s card protection cost about £30 [$46.70] a year and identity protection £80 [$124.54], the FCA said.
CPP agreed to repay customers about £14.5 million [$22.574 million] and pay a fine of £10.5 million [$16.35 million] last year. The York, England- based customers will need to hold a vote to approve the program and seek court approval before payments can start, the FCA said.
Spokesmen for Barclays and Lloyds had no immediate comment on the FCA announcement. An RBS spokesman didn’t immediately return a telephone call and HSBC didn’t return an e-mail sent to its press office.
With assistance from Sarah Jones and Gavin Finch in London
Editors: Edward Evans, Jon Menon