Scandal-hit CPP plunges to £20m loss

A mis-selling scandal and falling sales sent struggling credit card insurer CPP Group plunging to a £20m annual loss.

The company, which was last year fined £10.5m by the Financial Services Authority for “widespread” mis-selling, warned it continues to face “significant financial challenges” as it looks for funding. Sales from continuing operations fell 10 per cent to £270m in 2012 as fewer customers signed up or renewed policies.

Exceptional costs of about £44m wiped out earnings and compared with pre-tax profits of £21.6m a year earlier. The York-based company, founded more than 30 years ago by entrepreneur Hamish Ogston, sells products such as wallet, mobile phone and card protection through banks and building societies but has been battered by the mis-selling scandal.

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The Financial Services Authority last year slammed CPP for treating customers unfairly, selling them insurance they did not need, automatically renewing policies and exaggerating the risks of not taking out its insurance. The mis-selling scandal ran between 2005 and 2011, during which time CPP sold 4.4m policies and renewed almost 19m.

Of the 4.4m policies, it is believed only about 300,000 were sold directly by CPP, while lenders were responsible for 4.1m. CPP recently set aside £51.7m to cover the fine, customer compensation and other costs – but warned this figure may rise further. Mr Ogston is attempting to take the company private with a possible 1p per share offer worth £1.7m.

The entrepreneur has said an offer would need the backing of CPP’s board, plus a new three-year credit line.

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