Another mis-selling scandal looms, after a Financial Services Authority investigation concluded that credit card insurer CPP has mis-sold credit card and identity protection policies. It ordered the firm to carry out a review into past sales, and where appropriate, compensate customers.
Shares in the firm were suspended yesterday. Last week Barclaycard decided not to renew its contract with the company, having already suspended some sales of CPP products last year, and will now end all others within three to six months. HSBC and Tesco Bank stopped offering CPP products last year.
CPP has been under investigation over its sales practices since last March, when it stopped selling identity protection products to new customers.
"The FSA has serious concerns about the manner in which customers were being sold identity theft and card protection policies by the firm," the regulator said in a statement.
"It is likely that the firm will be required to carry out a past business review of the direct sales it made for both products and, if appropriate, pay redress. We are in discussions with the firm about the scope of such an exercise. Customers do not need to take any action but should they have any immediate concerns they can contact the firm."
It appears that some customers who bought identity theft protection from CPP thought this would cover them for loss of money fraudulently siphoned from bank accounts - when in fact, CPP's insurance covers the administrative costs of dealing with identity theft.
CPP's card protection policy, priced at £36.99 for a year, offers a one-call service to cancel missing cards and order new ones, replace locks and keys plus car hire as well as providing emergency cash advances.
However, most card issuers have a lost & stolen number and reimburse customers for any loss of money from stolen cards, making it unnecessary to buy an additional card protection policy. The FSA believes the way CPP's card protection was sold was mis-leading.
It is unclear whether CPP's banking partners - which include Barclays, RBS and HSBC - will get dragged into compensation negotiations. Paul Stobart, CPP's chief executive, told the Guardian: "We don't know" but added that the firm was going on a charm offensive with them this week.
CPP employs 1,341 people in the UK, operates in 16 countries and floated on the London stock market in 2010. It informed the FSA that its requirements were "disproportionate" and threatened the "viability of the business".
The case also highlights concerns surrounding Homeserve - they too have said they are "working closely with the FSA," noted Peel Hunt analyst Henry Carver. Homeserve has also been embroiled in a mis-selling scandal, after an internal review last autumn found its telesales staff had been mis-selling emergency insurance cover for boilers and other domestic appliances. It suspended UK sales calls to review marketing and re-train its agents, and passed the report, from Deloitte, on to the FSA. The big question is whether the regulator will order Homeserve to pay out any compensation to customers.