CPP says FSA probe risks firm’s future
CREDIT CARD insurance firm CPP says the Financial Services Authority (FSA) could force it out of business, after the regulator asked for a retrospective review of sales tactics.
The company suspended its shares on the London Stock Exchange yesterday after declaring that the new demands “are disproportionate and threaten the viability of the business”.
The FSA yesterday said it is likely CPP “will be required to carry out a past business review of direct sales and, if appropriate, pay redress” as the regulator enters the twelfth month of its investigation into allegations of mis-selling at the York-based firm.
Although both parties agree that a business review is appropriate, they disagree as to the extent of the investigation. CPP claims the FSA’s demands could bankrupt a firm that floated for £150m in 2010.
If the firm ceased trading it would leave no money for possible compensation and put almost 1,969 jobs at risk.
In a statement the regulator said: “The FSA is committed to ensuring consumers are protected and that the firm treats its customers fairly.
“The FSA has serious concerns about the manner in which customers were being sold identity theft and card protection policies by the firm.”
CPP now has two weeks to come to an agreement with the FSA on the form that any reappraisal will take.
The firm has already suspended sales of its identity insurance product and recently lost an important contract with Barclaycard.
Henry Carvers, an analyst at Peel Hunt, said the outlook is bleak: “If the FSA holds its ground that effectively means paying back a lot of money to a lot of customers, which could be potentially crippling for CPP.
“It’s difficult territory,” he continued. “Can you genuinely ascertain whether someone was duped into buying a product?”
Shares in the firm last traded at 103p, down from 235p when it floated in March 2010.