As loyal readers know, I have on numerous occasions noted that the financial services industry in the UK has tarnished its image because of its greed and corruption, and seems intent on bringing about its own self destruction.
Today we see yet another example wherein its greed has been exposed because of yet another mis-selling scandal.
This time the mis-selling relates to card protection and identity theft insurance products by CPP Group. The BBC reports that UK banks have agreed to set up a £1.3BN fund to compensate the victims.
The Financial Conduct Authority (FCA) said that customers had been "given misleading and unclear information about the policies".
CPP Group and 13 banks and credit card firms will pay for the compensation.
Some seven million customers could now expect to receive letters from CPP from 29 August 2013, explaining how to claim compensation. Victims will receive 8% interest on the amounts being reimbursed.
During the period of mis-selling between January 2005 and March 2011, CPP sold 4.4 million policies and generated £354M in gross profit. A further 18.7 million policies were renewed during the same period, generating an income of £656M.
Many customers were put in contact with CPP when they rang a number on their new bank card in order to activate it. Many thought they were talking to their bank, but they were in fact being put in touch with a salesperson from CPP.
CPP then used the opportunity of the call to offer card protection insurance. If the customer bought the product, the bank got a commission.
CPP Group sold a card protection product costing about £30 a year, that was designed to cover losses if a card was lost or stolen. It said customers would benefit from up to £100,000 of insurance cover, but customers were already covered by their banks. Generally, cardholders are not liable for unauthorised card payments on lost or stolen credit and debit cards; ie the product was unnecessary.
Needless to say we can expect to see the "ambulance chasing" financial compensation firms jumping on this bandwagon and offering to reclaim victims' money back in exchange for a percentage; which of course is completely unnecessary,as the victims can reclaim the money themselves.