Banks are now facing a massive bill to pay for millions of customers back for mis-sold products.
Millions of customers throughout the United Kingdom who were mis-sold credit card theft policies will be receiving a portion of an insurance fraud compensation fund payout that currently totals £1 billion.
The compensations will be issued to the qualifying customers over the next few months.
Eligible customers for the insurance fraud compensation payout are from Barclays, HSBC, Nationwide, Santander, and NatWest. They will be receiving the payment that is due to them at some point in the upcoming months. This is the result of a considerable investigation that was conducted by the Financial Conduct Authority, last year, into CPP, which was a business that was selling what was supposed to be card and identity theft cover, through the aforementioned banks from 2005 through 2011.
The Financial Conduct Authority discovered that many customers were being duped and that this was insurance fraud.
It determined that the policies were being sold to customers to provide unnecessary coverage in the case that a card was ever lost or stolen, or in the case that identity theft should have occurred. The policies together cost an annual £120 for a coverage of up to £100,000 in the instance that a thief should use a stolen credit card on a spending spree. However, banks already provide this coverage to customers as a free part of their service, so it was deemed to be entirely unnecessary.
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Customers were also told that they would receive coverage of up to £60,000 for losses associated with identity theft. However, those that tried to benefit from this coverage in instances when they were victims of identity theft discovered that this coverage was only for administration and legal expenses and not for the fraudulent debts that the thieves had accumulated. That said, the banks, themselves, will typically cover those debts, which created concerns regarding the need for paying for the additional coverage.
Following months of negotiations and talks, the banks, the Financial Conduct Authority, and CPP have nearly come up with a compensation deal for this case of insurance fraud. Affected customers will receive a letter from their banks within the next short while, providing them with advice regarding how they will be able to make a claim.