UK banks to pay £1.3bn for mis-selling

THE UK’s biggest banks will pay as much as £1.3bn to compensate customers wrongly sold insurance to cover credit card and identity theft.

A group of 13 banks and credit card issuers, including Barclays, Lloyds Banking Group, HSBC Holdings, Royal Bank of Scotland Group, Capital One (Europe) and MBNA would fund the redress programme, the Financial Conduct Authority said yesterday. The regulator did not disclose the firms’ individual contributions.

Barclays, a majority shareholder of Barclays Africa, may have to pay £286m, more than any other UK bank, because it has the largest share of the credit card market, Mark Phin, an analyst at Keefe Bruyette & Woods, said yesterday. Barclays, HSBC, RBS and Lloyds may have to pay a combined £650m, he said. Lloyds’s costs may be as little as £52m, he said.

“This is clearly unhelpful,” London-based Mr Phin said. “But it’s small in isolation and we fully expect that some provisions will have been taken by the banks already.”

Regulators said in November that CPP Group, which provided the insurance for the lenders, overstated the risks and consequences of identity theft and failed to tell buyers of its cardprotection product that they were already covered for losses of as much as £100,000 by their banks. The compensation adds to the £15.5bn Britain’s banks have already set aside for customers who were wrongly sold payment-protection insurance that they did not need.

“The involvement of the banks and credit card issuers reflects the fact they introduced customers to CPP’s products and so must share responsibility for putting things right,” the Financial Conduct Authority said.

About 7-million customers who bought the insurance since 2005 would be able to claim a refund on the premiums they paid plus 8% interest, the London-based authority said. The money is expected to be paid early next year. Banks sold the insurance under names such as HSBC Card Guard, Barclays Cardholder Protection and NatWest Card Protection.

CPP’s customers would have to approve the programme and seek court approval before payments could start, the authority said. CPP’s shares fell as much as 26% yesterday and were down 19.8% at 16.25p before the close, for a market value of about £28m.