Banks To Face Millions More In Compensation Payments

Britain's major high-street banks could be forced to pay out millions more in compensation to customers for a widely mis-sold card protection product, in the ongoing PPI scandal.

The Financial Services Authority is in discussion with the banks about how this could be paid after the watchdog announced it had hit identity theft and credit card insurance company CPP for £33.4m in fines and compensation to customers.

Of the £33.4m, CPP is provisionally putting aside £14.5m to be paid to customers mis-sold its card protection and identity protection products between January 2005 and March 2011. However, this only covers direct sales made by CPP; the vast majority of sales were made via high street banks including Santander and HSBC.

A number of the banks "introduced" their customers to CPP by affixing a sticker to new credit or debit cards sent to customers. The sticker prompted the customer to call a number, which was CPP's, either to activate the card or to confirm receipt of it. When the customer did ring, CPP also used the opportunity to offer card protection and/or identity protection to the customer.

"While CPP's products were relatively inexpensive, they were sold widely and CPP encouraged its sales agents to be overly persistent," Tracey McDermott, the FSA's director of enforcement and financial crime said. "This exposed a very large number of customers to the unacceptable risk of buying products they did not want or need."

(H)