This piece first appeared in Saga Magazine in March 2014

 

MILLIONS IN LINE FOR CPP COMPENSATION

If you have paid for credit or debit card protection or ID theft assistance from an insurer called CPP you could be one of the seven million people entitled to a full refund of all the premiums you have paid back to 14 January 2005 plus interest at 8%. That could be several hundred pounds.

CPP mis-sold two products. The first, Card Protection was sold under various names such as CardGuard or Card Safe. It was supposed to cover you against loss if your credit or debit card was lost or stolen. It cost around £35 a year but the City regulator said CPP paid only 60p for it. Card Protection was widely mis-sold by sales staff working from scripts which failed to mention that your bank or card provider would cover all your losses after you reported your card missing and your liability before you reported it was normally limited to £50. In cases where your bank would not pay nor would CPP.

The second was identity protection. It paid out when your ID was stolen and covered the costs of restoring your credit status and gave you reports on it. ID protection was widely mis-sold by exaggerating the risk of ID theft and its financial consequences. It cost around £85 a year but most of what it offered could be got free or at much lower cost – it cost CPP £16.

CPP’s sales took off after the firm did a deal with major High Street banks and card companies. It agreed that when they sent out new credit or debit cards there would be a sticker on the front inviting you to call a freephone number to ‘activate’ the card or ‘register’ its safe arrival. But when you called you were put straight through to a CPP salesperson who tried to persuade you take out the card protection or ID theft insurance. They often used false or exaggerated information to make the sale.

COMPENSATION
In November 2012, after a long investigation, CPP was fined £10.5 million by the City regulator. It paid compensation to some people sold the products directly by CPP. But it took another nine months to get agreement with the banks and other firms who had colluded in the mis-selling. They will now pay a total of £1.3 billion in redress but no bank has yet been fined.

It took five months more to get the CPP Redress Scheme agreed and by the middle of March seven million claim forms will have been sent out to the people the Scheme believes are due a payment. If they bought both products then they will get one form for each.

There is a box on the form where you must state the reasons why you were mis-sold. Helpfully, the reasons why the product was mis-sold are listed in paragraphs above the box. All you need do is copy one or more of those reasons into the box. Sign and date it and return it as soon as possible. There will be adverts for firms to help you fill the form in. These are a waste of time and money. It has been designed to be done without help. No claim will be considered if the form arrives after the end of August unless there were exceptional circumstances.

You will get back all the premiums you paid for either product from 14 January 2005 – the date when the current system of regulation first applied to insurance products – until sometime in 2011 when the products were changed. In addition interest at 8% per annum will be added to each premium from when it was paid to when the redress is calculated. The payments will probably be in the low hundreds of pounds but could be more if you had both products over a long period of time.

The refund will be tax-free but the interest will have tax deducted at 20%. If you are a non-taxpayer you can claim the tax back from HMRC using a form called R40. If you pay higher rate tax you will have to declare the interest – normally on your self-assessment form – and pay another 20% tax on it. Apart from the return of premiums and interest no further compensation will be paid. If you have claimed on the policy at any time the amount paid will be deducted from the payment. Claiming will automatically cancel your policy.

If you have claimed compensation already and been paid then you cannot claim again. If you claimed compensation after 22 August 2013 or an earlier claim was refused you must now claim again using the form you should have been sent.

It is possible the Scheme does not know your current address. If you think the Scheme should apply to you and you have not been sent a claim form by the middle of March then contact the Scheme and get on the list.

NOT COVERED
The CPP Redress Scheme does not cover everyone who had CPP policies nor all the premiums they may have paid.

First, any premiums paid before 14 January 2005 are not covered. Compensation can still be claimed by making a direct complaint to CPP and the bank or institution which was part of the sale.

Second, the Scheme only covers policies sold through CPP and 13 banks and financial firms. If you bought it through any other firm then you will have to complain directly.

Third, ID theft insurance is only covered if it was sold on the phone. Face to face or online sales are not included in the Scheme.

Fourth, if you got the CPP policy as part of a packaged bank account it is not covered because the policy was not directly sold to you. However, if the overall package was not clearly explained to you then that could also have been a mis-sale.

In all these cases you can put in a complaint to the firm that sold you the policy or was involved in the sale. You will have to explain why you were mis-sold. Usually that is because the benefits were exaggerated or the suitability not assessed. If you are refused you can go direct to the Financial Ombudsman Service. Many firms will pay up at that stage rather than fight it. If you claim outside the CPP Redress Scheme you can ask for compensation for your time, trouble and distress and any consequential losses as well.

CPP was not alone is selling and mis-selling card protection and ID theft insurance policies even though the consumer organisation Which? says they are ‘not worth paying for’ and ‘a needless expense’. There is no automatic redress scheme for any of these others. But if you have bought products of this type from another firm it is worth complaining about the way they were sold to you. If their true value had been explained very few people would have bought them. If you are not successful go to the Financial Ombudsman.

MORE INFORMATION

·         CPP Redress Scheme www.cppredressscheme.co.uk or call 08000 83 43 93

·         Financial Ombudsman Service www.financial-ombudsman.org.uk/consumer/complaints.htm or call 0300 123 9 123

·         HMRC.gov.uk – search for ‘Form R40’


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