Card Insurer CPP Hit With £10.5M Fine
Credit card insurer CPP has been hit with the joint-largest mis-selling fine imposed by the City watchdog after "significant historic failings" were uncovered.
The company agreed to pay a £10.5m penalty after the Financial Services Authority (FSA) uncovered large-scale misrepresentation in selling insurance products to consumers.
Only one other firm has previously been hit with a mis-selling fine of £10.5m.
The conclusion to the investigation was confirmed after Sky's City Editor Mark Kleinman revealed details of a settlement last night.
The phased penalty, to be paid in six instalments until the end of 2014, was announced following an investigation which began early last year.
The financial impact of the FSA inquiry - once issues such as compensation are taken into account - will rise to £33.4m and CPP said the bill would have a material impact on it.
The company's statement said: "CPP acknowledges that there were significant historic failings which occurred in the period from January 2005 to March 2011.
"The Group welcomes the opportunity to conclude its discussions with the FSA on these issues and to resolve the uncertainty that has surrounded the business regarding the duration and outcome of the investigation."
The firm has had to halt a number of its insurance products after widespread mis-selling to UK consumers came to light.
In its statement CPP also revealed a business partnership contract with RBS will likely end next March.
The FSA's decision to drop its probe into the company was made in return for a binding agreement on a multi-million pound compensation pot for customers.
CPP is expected to pay compensation to both private individuals mis-sold products and businesses who were also insured through the firm.
The FSA said: "CPP has ... agreed to pay redress and estimates that around £14.5m will need to be paid to affected customers, but this could change depending on how many customers respond to CPP's contact exercise."
Shares in the firm have fallen from an early 2011 high of 300p to below 6p recently. In early Thursday trading CPP shares dropped more than 6% before recovering over 14%.
The credit card insurer disclosed earlier this month that it had received a takeover approach from the American company behind the rival Sentinel brand.