‘Put jobs first’ plea by MPs over credit card insurer

The York-based company last week struck a deal with the City watchdog on a mis-selling review, but warned it could cost up to £15m.

Now the firm is locked in talks with its lenders Royal Bank of Scotland, Santander and Barclays, which are reportedly refusing to extend its loan facilities.

Julian Sturdy, MP for York Outer, and Hugh Bayley, York Central MP, wrote to the banks urging them to take a “balanced and sensitive approach”, to avoid pushing the firm into administration.

The MPs wrote: “Should CPP be forced into administration over 1,300 jobs would be lost in the UK. The majority of those jobs are based in York, but mass redundancies would be felt throughout the Yorkshire region.

“In the light on ongoing and positive talks between the FSA and CPP, we would strongly urge all involved parties to place the importance of local jobs at the forefront of any discussions with the business.”

CPP sells protection for credit cards, wallets and mobile phones to customers of banks and building societies, including RBS and Nationwide. Its life-saving deal with the Financial Services Authority last week imposed less stringent demands than previously feared.

Under a review of mis-sold policies, CPP will contact customers it approached directly to buy its products. The agreement also forces CPP to “highlight more clearly” that customers have the right not to renew its products. However, the agreement stops short of forcing CPP to cease automatic renewals.

Prior to striking the agreement, CPP had warned the FSA’s demands threatened its viability. The agreement will cost the group £10m to £15m through loss of business, compensation and implementing the review.

CPP has borrowings of about £43m, but holds cash of more than £50m. Its £80m revolving credit facility with the three banks expires in March 2013.

CPP employs 1,969 globally, including about 1,000 in York. Last week staff at the firm wrote to the FSA to warn the mis-selling clampdown risks hundreds of livelihoods.

CPP’s directors, led by chief executive Paul Stobart, are trying to secure new loans ahead of its publication of annual results.

Announcing the FSA agreement on, CPP said: “CPP remains in discussions with various stakeholders, including its financing banks and business partners, as to the ultimate impact on the business of the FSA’s investigation.Until those discussions have concluded it is expected that the suspension of CPP’s shares remains in place.”

Barclaycard, one of its biggest customers, recently decided not to renew its contract last week. Analysts fear other firms may follow.