 "UK banks to pay $2 bn for mis-sold card-insurance")
Britain's biggest banks will pay as much as £1.3 billion ($2 billion) to compensate customers wrongly sold insurance to cover credit-card and identity theft.
A group of 13 banks and credit-card issuers, including Barclays Plc, Lloyds Banking Group Plc, HSBC Holdings Plc, Royal Bank of Scotland Group Plc, Capital One Plc and MBNA Ltd will fund the redress programme, the Financial Conduct Authority said in a statement on Thursday. The regulator didn't disclose the firms' individual contributions.
Regulators said in November that CPP Group Plc, which provided the insurance for the lenders, overstated the risks and consequences of identity theft and failed to tell buyers of its card-protection product that they were already covered for losses of as much as £100,000 by their banks. The compensation adds to the £15.5 billion Britain's banks have already set aside for customers who were wrongly sold payment-protection insurance that they didn't need.
"The involvement of the banks and credit-card issuers reflects the fact that they introduced customers to CPP's products and so must share responsibility for putting things right," the FCA said in the statement.
About seven million customers who bought the insurance since 2005 will be able to claim a refund on the premiums they paid plus 8 per cent interest, the London-based FCA said. The money is expected to be paid in early 2014.
Barclays costs?
Banks sold the insurance under names such as HSBC Card Guard, Barclays Cardholder Protection and NatWest Card Protection. Typically, CPP's card protection cost about £30 a year and identity protection £80, the FCA said.
Barclays may have to pay 286 million pounds, more than any other UK bank, because it has the largest share of the credit card market, Mark Phin, an analyst at Keefe Bruyette & Woods Ltd, said in a note to clients on Thursday. Barclays, HSBC, RBS and Lloyds may have to pay a combined £650 million, he said. Lloyds's costs may be as little as £52 million, he added.
"This is clearly unhelpful," London-based Phin said. "But it's small in isolation and we fully expect that some provisions will have been taken by the banks already."
CPP's customers will have to vote to approve the programme and seek court approval before payments can start, the FCA said.
The York, England-based company agreed to repay customers about £14.5 million and pay a fine of £10.5 million last year. CPP said on Thursday it will only be responsible for funding compensation for customers to whom it sold insurance directly.
Shares fall
The insurer's shares fell as much as 26 per cent in London trading today and were down 19.8 per cent at 16.25 pence as of 10:42 am, for a market value of about £28 million. The FTSE 350 Banks Index was up 1.2 per cent to 4,923.99.
"We are determined to put things right for Barclays customers who are eligible for redress payments as swiftly as possible," Paul Maddox, Barclays's managing director for customer service, said in a statement.
RBS and Lloyds said in separate statements they will work with CPP to achieve "the best outcome" for customers affected. Officials at HSBC declined to comment.
A group of 13 banks and credit-card issuers, including Barclays Plc, Lloyds Banking Group Plc, HSBC Holdings Plc, Royal Bank of Scotland Group Plc, Capital One Plc and MBNA Ltd will fund the redress programme, the Financial Conduct Authority said in a statement on Thursday. The regulator didn't disclose the firms' individual contributions.
Regulators said in November that CPP Group Plc, which provided the insurance for the lenders, overstated the risks and consequences of identity theft and failed to tell buyers of its card-protection product that they were already covered for losses of as much as £100,000 by their banks. The compensation adds to the £15.5 billion Britain's banks have already set aside for customers who were wrongly sold payment-protection insurance that they didn't need.
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| BANKS IN TROUBLE Britain's biggest banks will pay as much as £1.3 billion ($2 billion) to compensate customers wrongly sold insurance to cover credit-card and identity theft. |
Following is a list of banks that have agreed to provide the compensation
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"The involvement of the banks and credit-card issuers reflects the fact that they introduced customers to CPP's products and so must share responsibility for putting things right," the FCA said in the statement.
About seven million customers who bought the insurance since 2005 will be able to claim a refund on the premiums they paid plus 8 per cent interest, the London-based FCA said. The money is expected to be paid in early 2014.
Barclays costs?
Banks sold the insurance under names such as HSBC Card Guard, Barclays Cardholder Protection and NatWest Card Protection. Typically, CPP's card protection cost about £30 a year and identity protection £80, the FCA said.
Barclays may have to pay 286 million pounds, more than any other UK bank, because it has the largest share of the credit card market, Mark Phin, an analyst at Keefe Bruyette & Woods Ltd, said in a note to clients on Thursday. Barclays, HSBC, RBS and Lloyds may have to pay a combined £650 million, he said. Lloyds's costs may be as little as £52 million, he added.
"This is clearly unhelpful," London-based Phin said. "But it's small in isolation and we fully expect that some provisions will have been taken by the banks already."
CPP's customers will have to vote to approve the programme and seek court approval before payments can start, the FCA said.
The York, England-based company agreed to repay customers about £14.5 million and pay a fine of £10.5 million last year. CPP said on Thursday it will only be responsible for funding compensation for customers to whom it sold insurance directly.
Shares fall
The insurer's shares fell as much as 26 per cent in London trading today and were down 19.8 per cent at 16.25 pence as of 10:42 am, for a market value of about £28 million. The FTSE 350 Banks Index was up 1.2 per cent to 4,923.99.
"We are determined to put things right for Barclays customers who are eligible for redress payments as swiftly as possible," Paul Maddox, Barclays's managing director for customer service, said in a statement.
RBS and Lloyds said in separate statements they will work with CPP to achieve "the best outcome" for customers affected. Officials at HSBC declined to comment.