CPP "deeply sorry" after record fine
CARD and phone protection provider CPP is facing up to £33.4m in costs related to an investigation into its selling practices by the Financial Services Authority after the regulator imposed its record retail fine.
The FSA tannounced it was fining CPP £10.5m for “widespread mis-selling” with a further £14.5m expected to be paid to customers in compensation.
York-based CPP expects additional costs associated with the investigation to take the total hit to the company to £33.4m, more than the £24.9m it had already set aside.
The FSA criticised CPP for selling a card protection policy which offered cover already provided by banks and for overstating the risks of identity theft when selling identity theft protection.
Tracey McDermott, the FSA’s director of enforcement and financial crime, said: “This is a serious case, one that has warranted our joint largest retail conduct fine and generated a sizeable bill for consumer redress.
“While CPP’s products were relatively inexpensive, they were sold widely and CPP encouraged its sales agents to be overly persistent. This exposed a very large number of customers to the unacceptable risk of buying products they did not want or need. Further, we had already warned the firm that it might be misleading customers about a feature of card protection from which customers were unlikely to benefit, but insufficient action was taken to rectify this.
“We have highlighted before our concerns about low cost insurance that offers little or no value to the customer. This case shows the action we will take if our warnings are not heeded.”
CPP acknowledged “significant historic failings” in the way it had traded between 2005 and 2011 and welcomed the end of the investigation.
Chief executive Paul Stobart said: “We are deeply sorry for the errors and wrongdoings of the past and are paying a heavy penalty through what is a large fine. The investigation is however now closed and we must look to the future.
“The next steps for the team are to complete the transformation programme and to rebuild our business and our reputation in the market.
“Today, the closure of the investigation marks an important milestone. I am confident that our creativity in product marketing and our passion for providing the customer with an outstanding experience, will, when combined with the strong governance across the Group, provide us with a platform for future success.”
The FSA investigation has had a huge impact on the company’s share price which was trading above £3 before it was made public and in recent months has been below 10p although it had recovered to 24.25p last night on the back of takeover talks with Affinion Group.
It has already lost contracts with Barclaycard and Everything Everywhere and this morning announced RBS had also it would not be renewing its contract.
CPP that talks with Affinion were at a “very early stage” and it was in discussions with its banks over its debt facilities which mature in March.
It hinted that redundancies may be on the cards as it was “inevitable that the group will have to reduce its cost base in line with the new operating environment”.
