CPP to pay out £14.5m: is some of it yours?

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The FSA investigation found that Card Protection Plan Limited (CPP) offered insurance of up to £100,000 against fraud which was already covered by banks and that it "overstated the risks associated with identity theft" when trying to persuade customers to purchase its ID Protection product.

Those affected by the mis-selling scandal could be in line for a refund of any premiums paid, plus a likely 8% interest.

CPP, which sold its products directly and through the major high street banks, has set aside a further £14.5 million to cover redress but this only covers customers it handled directly.

The vast majority of CPP's revenue was via high street banks, who directed customers to CPP call centres via stickers on new credit or debit cards.

The final bill for compensation could run into hundreds of millions of pounds.

Who's affected and eligible for repayment?

Customers sold policies by CPP directly will be sent a letter by the firm telling them how to make a claim.

Many people bought a policy when they got a new card and called to activate it so it may be worth them checking bank statements around the time a new card was issued.

Fraud protection was usually sold for £35 for a year. Identity theft protection was more expensive, usually around £80 for the year.

Together, then, the two products cost consumers nearly £120 a year and, like PPI, the policies may have been renewed annually so the total compensation could be many hundreds of pounds for some CPP customers.

Customers of the high street banks - including Nationwide, RBS/Natwest, HSBC, Barclays and Santander - will have to wait and see whether they'll get any compensation, however, as the FSA are still in talks about how the claims should proceed.

It is hoped that, again as with the PPI mis-selling scandal, banks will write to their customers to inform them that they may have been mis-sold ID protection and advise on what next steps to take.

Identity crisis

Despite the fact that the FSA started looking into CPP in December 2011, it's not yet clear whether other, similar identity theft protection products offered by the high street banks will result in repayments for mis-selling.

However, products sold to protect against identity theft and fraud with a similar focus on insurance will come under close scrutiny from the FSA.

In this case the FSA investigation looked at what CPP termed "significant historic failings" at the company between January 2005 and March 2011.

CPP sales teams overemphasised the benefits of insurance against ID theft and fraudulent transaction to callers who were ringing to activate new debit or credit cards from their banks.

As our full guide points out, in most cases identity theft insurance is not needed, as banks will provide cover for consumers in most circumstances.

Consumers are not normally liable for fraudulent or unauthorised transactions.

The FSA also found that CPP staff persisted with sales after callers had turned down the purchase and took payments from its customers each year without reminders or renewal letters.

Paul Stobart, CPP Chief Executive Officer said, "We are deeply sorry for the errors and wrongdoings of the past and are paying a heavy penalty through what is a large fine."