Bank sold protection policies for fraudulent transactions on stolen cards
But banks are already obliged to compensate customers for fraud
Fears it could spell trouble for the taxpayer as Lloyds is state-backed
Lloyds could be hit with another multi-million-pound compensation bill over fears that it mis-sold worthless insurance to thousands of its credit-card customers.
For years, the state-backed bank sold protection policies that promised to reimburse customers for fraudulent transactions if their cards were lost or stolen.
But the insurance – provided by the US firm Affinion – was worthless as banks are already obliged to compensate customers for fraud.
The case has echoes of the scandal involving a British credit-card insurer called CPP, used by High Street lenders including Royal Bank of Scotland, HSBC, Barclays and Santander.
This week the Financial Conduct Authority announced that 7million of their customers would soon receive forms to claim a share of up to £1.3billion in compensation.
Customers, who typically paid £30 to £80 a year for fraud-protection policies, will receive their money back plus interest.
Lloyds distanced itself from the scandal, saying only its subsidiary Bank of Scotland used CPP.
But it has emerged that the rest of the group, including Halifax and Lloyds TSB, sold similar policies provided by Affinion until May 2012.
Separate policies called IDAware and Privacyguard included promises to protect customers against identity fraud, but these are no longer sold by the bank.
John Mann, Labour MP and member of the Treasury Select Committee, said the claims could mean problems for the taxpayer
Other banks, including Royal Bank of Scotland and Santander, are also thought to be involved in discussions with the regulator, but the bulk of the compensation is expected to be paid by Lloyds.
The development is highly embarrassing for the bank, which this week announced a £1.8billion provision to pay compensation to customers mis-sold payment protection insurance. This takes its total bill to almost £10billion
John Mann, Labour MP and member of the Treasury Select Committee, said: ‘Further problems for Lloyds mean further problems for the taxpayer.
'There seems to be no one successfully holding the senior Lloyds management to account. Until this happens, these banking scandals will continue.’
CPP, whose founder Hamish Ogston amassed a £100million fortune, was fined £10.5million by the City watchdog last year.
With the help of Britain’s banking giants, his company misled customers into buying worthless insurance for their credit, debit or store cards.
Asked about the £1.3billion compensation payout, he described it as a ‘ridiculous figure’ and accused the Financial Conduct Authority of sensationalism.
The bosses of Affinion have also received huge rewards.
Regulatory filings in America show that Nathaniel Lipton, the company’s chairman, received a £1.2million pay package in 2012 and £3.3million the previous year.
Last night a Lloyds source confirmed that it would ‘put customers right if mis-selling has occurred’, adding that any compensation bill would ‘not be financially material’.
Affinion said: ‘All businesses regulated by the FCA communicate regularly with them and we are no exception.
'We cannot comment on the specifics of particular discussions, but we take our regulatory compliance obligations very seriously and our overriding objective is to treat our customers fairly.’
Source Daily mail
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