When you received your credit card or debit card that you applied for with your local bank, did you notice the sticker prompting you to call a certain number either to comply with the activation process or to confirm your receipt? Upon doing so, were you intensely appraised about the dangers of identity theft and strongly urged by a persistent customer care agent to avail of a card protection product? Have you been paying precious, hard-earned money for “peace of mind” on your card transactions and security? If so, you may have already heard of –if not a victim of – the CPP insurance controversy which recently plagued the financial services group.
Dissecting the Scheme
Just between January 2005 and March 2011, CPP is estimated to have sold about 4.4 million card protections and identity theft insurance to bank customers who thought that they are getting their money’s worth in view of the protection that they’ll be getting in case of loss or theft. The scale by which CPP was able to perpetrate the scheme brings highlights one question: how did it pull it off?
For years now, CPP has been greatly successful in forging relationships with Britain’s major banking institutions in the sale of its financial services and products. Typically, banks would send the customer’s cards with a sticker or a notice requesting the latter to make a call to a certain number for confirmation or activation of the card.
Unknowingly, the customer is actually calling the number of CPP who takes advantage of the situation to preach about the extreme dangers of identity theft and presents worst case scenarios regarding card transactions so that when the agent finally brings up the idea of card insurance, the customer would easily take the bait and shell out money for it. Some banks would even sell the products directly to their customers who believed that the insurance products are offered by the banks themselves.
The Sting in the Tail
In exchange for the “security”, customers would have to put up an annual card insurance fee of £35 and £84 for identity theft protection. Customers are particularly lured by the prospect of getting an insurance indemnity up to £100,000 and the convenience of one-call card cancellation, among others. However, what the customers do not know is that they can already avail of these inclusions from their banks – they, really, are only shelling out money for an unnecessary product. While customers struggle to come up with their annual payments, CPP amassed approximately £188.3 Million in earnings – a portion of it went to the banks as their introductory fee.
Out of the deep delving and the series of investigations commenced since 2011, the Financial Services Authority (FSA) has come to the conclusion that the CPP, indeed, committed violations against the regulations it has implemented to protect customers against unscrupulous and disadvantageous insurance schemes. As a consequence thereof, CPP has been reprimanded a harsh penalty to the tune of £10.5 million which it is bound to pay in installments. There are also ongoing discussions between the financial services group and the FSA pertaining to a sound and practical scheme of compensation for customers who were duped into availing of the insurance. Britain’s major banks may also be facing judgment for their participation in the far-reaching scheme with the possibility of a huge fine – giving a glimmer of hope to the millions of clamoring customers and the potential for long-overdue improvements and reform in the country’s banking, quasi-banking, and retail industries.