Around seven million people are set to share up to £1.3bn in compensation after 13 high street banks and credit card companies agreed to offer redress for mis-sold credit card and identity theft protection.
The Financial Conduct Authority (FCA) said banks and credit card firms, together with card insurer CPP Group, have agreed to a compensation package which will see millions contacted by CPP.
While CPP sold some policies directly to customers, banks and credit card companies also introduced millions of people to CPP, so the FCA said they “must share the responsibility for putting things right”.
Major lenders including Barclays, HSBC, Royal Bank of Scotland and Lloyds Banking Group have signed up to the compensation scheme, which is the latest blow to the banking industry after the multibillion-pound payment protection insurance (PPI) scandal.
FCA boss Martin Wheatley said: “We believe this will be a good outcome for customers who may have been mis-sold the card and identity protection policies.”
The FCA said compensation will depend on the type of policy held and how long they had it.
If customers are due compensation, they will be entitled to the amount paid for their policy since January 14, 2005, plus eight per cent interest on any sum owed.
Unlike the PPI compensation deal which involves customers contacting lenders, CPP will get in touch with customers.