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Scandal alert: is identity theft insurance the new PPI?

Credit card poking out from shredded paper

Believe it or not, yet another mis-selling scandal is engulfing financial services. This time it’s card and identity theft insurance, and banks should not be let off the hook. Have you ever bought card or ID theft insurance?

The total bill for payment protection insurance (PPI) compensation is likely to hit £16bn, making it one of the biggest mis-selling scandals in history. So after the PPI scandal, you might be forgiven for thinking that the last of the skeletons were out of the banking closet.

But in November last year, the Financial Services Authority (FSA) issued a £10.5m fine to Card Protection Plan Ltd (CPP) for heavy and sustained mis-selling of ID theft insurance and card protection cover between 2005 and 2011. While you may not have heard of CPP as a firm, most of its policies were sold through some of the big name high street banks that mis-sold PPI.

Piling up the profits

The FSA’s investigation paints a shocking picture. It found that CPP’s customers were told they’d receive up to £100,000 worth of insurance cover against fraudulent transactions with their card protection insurance. However, many customers didn’t need this cover as their bank already provided it. It also found that while CPP was selling identity protection, it often exaggerated the risks and consequences of identity theft.

To top it off, CPP’s flagship identity theft insurance product was sold for around £84 a year, but the actual cost to CPP of delivering the product was just £16 a year. This means that customers were paying a mark up of around 425%. Worse still, CPP’s card protection product, which would set customers back £35 a year, cost CPP just 60p to produce. That’s a profit of 5,733%.

So how widespread is the problem? Well, between 2005 and 2011, CPP sold 4.4m policies, making £79.1m profit and collecting £844m in premiums. Interestingly, CPP shared as much as 60% of the revenue it earned with the companies that introduced it to potential policyholders – mostly the banks. Banks often passed customers directly to a CPP salesperson when they called up to activate a new debit or credit card, giving CPP a chance to give the hard sell on their overpriced insurances.

Banks must take blame

While it’s right that CPP was publicly censured and ordered to pay £14.5m in compensation, the banks that sold their products should not be let off the hook. Knowingly passing customers over to a company that would try to sell a useless financial product is a show of contempt. The FSA must make sure the banks are hauled over the coals for their part in yet another mis-selling scandal.

If you do have either of these policies from CPP, you don’t have to take any action right now. CPP will be contacting all its affected customers in the near future and will pay compensation where appropriate. Did you take out card protection or ID theft insurance from CPP? Do you feel you were mis-sold?


As far as I recall, the press (including Which I think) published warnings about the value of ID theft insurance for a number of years. Those who purchased it must take some responsibility for their actions.
What about life insurance, or extended guarantees, car warranty insurance, poor value annuities…etc etc. Just how far do we go protecting people from taking responsibility for themselves? We here of people moaning about banks taking any opportunity to try to sell them products they don’t want – so just say no or, at least, go away and look at what they offer before you decide.
Fraudulent selling is one thing, over-priced products another. The best solution is to educate people in what is a hard world.

Oh rats, that’s another windfall I’m going to miss out on. I must be more causal with my finances, I could do with a windfall. Well that was written based on the headline.

Having read the post, seems like its just another example of a very poor value product. You’d think people would be wary of these things, we do live in Rip Off Britain you know.

FSA watch says:
4 January 2013

This sort of scandal is bigger than the great train robbery. But the difference are:
The great train robbery committed by individual crook. Punishable by jail term.
This scandal are committed by reputable krooc through tarnish banking system run by greedy people at the top who don’t care about their customer but jump at chance to take a cut on any money they can lay hand on. Punishment? Softly softly by FSA, payback what you earn.
By the time punishment come perhaps most at the top is not even there.
Why this scandal keep happening. Simple, it take 10 years for FSA to smell the rot. If we take the figure from this story as base to workout at very poor Bk of England base rate 0.5%. On interest earning alone.
The krooc company earn £4.22m/yr
The greedy bank earn £6.13m/yr
This make FSA penalty is laughable and get ready for the next crook project.

Simon Gregory says:
10 January 2013

Yes. The banks have been at it again. I’m sure there are more skeletons still in the closet to come out.

They are greedy and have very little in terms of ethics.

I claimed back all my PPI with 8% interest.

I have also looked into this CPP misselling and in turns out I’ve got it on everyone of my cards.

I rang CPP direct and got fobbed off. They said I wasn’t missold the policy and not entitled to claim.

I then did a search on line for a specialist solicitor and found a site.

Rang them and they were really helpful. They said they would get me my money back with interest within 10 weeks.
Ill keep everyone posted.

[Hello Simon, we have removed the link from your comment as we don’t allow advertising. Thanks, mods.]

David C says:
3 March 2013

My wife passed away in January 2007. When sorting out our joint bank accounts I was recommended to buy ID protection insurance from CPP. I was at a low ebb at the time and took it out just to save any ID problems later. I never took out PPI for when I checked it out it didn’t seem to apply to me. Wish I’d done the same with this ID protection.

Sam Hogan says:
3 March 2013

Hi David,

Sorry to hear of your loss..

You should google ‘CPP Claims’ and get back all of the money paid to CPP. You can either go direct to CPP (and in my own experience get fobbed off) or you should try one of them companies set up to assist people like us that have been bullied into taking card protection and ID theft which is totally useless.

Good luck.

Do the Goverment know???

I think a better question would be “Do the government care?”

I bought a Cardguard card protection policy through HSBC ~ November 2001. HSBC had left an activation telephone number on the card which I had to ring to register the card.
However, I did not take out Identity theft insurance.
The card protection policy was not £30, but was £12 charged annually from 2001. Obviously, it increased as the years went by.
Would I be eligible for a claim?
I had contacted HSBC in the past, as my claim predated 2005. They replied saying No – I was not eligible. This was before CPP was fined £10.5 million pounds.

Found this on the martin’s money saving website (from Nov 2012)

“CPP will only write to those it sold products to between January 2005 and March 2011. However, if you believe you were mis-sold outside these times, make a claim anyway. A mis-sell is a mis-sell, regardless of when it took place.”

And this on the Daily telegraph website ( yesterday ) “Anyone whose policy lapsed before 2005 will need to initiate complaint themselves throught the normal channels.”

If you make a claim and the bank reject it again take it to the Financial Ombudsman

Hope that helps