British
financial regulators struck a deal Thursday to give consumers as much as 1.3
billion pounds ($2 billion) in compensation after they were improperly sold
credit card insurance.
The
Financial Conduct Authority reached an agreement with Card Protection Plan Ltd
and 13 banks and credit card issuers to repay some 7 million customers for
insurance policies that offered coverage already provided by the banks or for
overstating the risks of identity theft.
The
authority fined CPP 10.5 million pounds last year for selling consumers
insurance they didn't need or to cover risks that were greatly exaggerated. But
the authority said it was encouraging that a deal could be reached to get
customers their money back with interest.
"We
believe this will be a good outcome for customers who may have been mis-sold
the card and identity protection policies," said Martin Wheatley, chief
executive of the FCA.
The
deal must still be approved by Britain's High Court. CPP's customers will also
be allowed to vote to make sure a majority approve of the settlement. Funds are
not expected to be paid out until next year.
"Subject
to CPP's customers approving the scheme, these policy holders will be able to
claim a full refund of premiums with interest," Wheatley said.
The
authority says customers will soon receive letters on the process. The redress
per customer will depend on the type of policy they owned and how long it was
held.
The
scandal comes as another blow to banks, which have already been hit with fines
for wrongly selling payment protection insurance. Those involved in Thursday's
deal include Bank of Scotland (part of Lloyds Banking Group); Barclays, HSBC,
Santander and Royal Bank of Scotland.
The
authority said that banks and credit card issuers were involved because
"they introduced customers to CPP's products and so must share
responsibility for putting things right."
Source: Associated Press
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