CPP – FSA record retail fine shows inherent product flaw just as serious as method of (mis)sale

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The FSA has fined Card Protection Plan Limited (“CPP”) £10.5m (reduced from £15m for early settlement) for breaches of Principles 3, 6 and 7. This is the joint largest retail fine levied by the FSA and arises out of serious breaches which took place over a prolonged period of time, despite FSA warnings and ARROW reports warning of compliance issues.

The Final Notice highlights a number of issues: 

  • The importance of dealing appropriately with the outcomes of ARROW visits and s.166 reports. In this instance, the FSA criticised CPP for failing to do so, which probably led to an increase in the fine.
  • ‘Benefits’ of a product must actually benefit a consumer; selling protection which a consumer already has is viewed by the FSA as mis-selling. This inherent flaw in the product was in itself sufficient to warrant enforcement action, regardless of how the product was sold (the more “traditional” treatment of whether mis-selling has taken place).
  • If an institution uses statistics or quotes from third parties to support sales of products, those statistics or quotes must be accurate and support the proposition in question…

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