CPP hit with record fine as FSA investigation draws to a close

CPP’s Holgate offices

CPP’s Holgate offices

Published in News York Press: Photograph of the Author by , Business editor

THE boss of one of York’s biggest private employers apologised yesterday after it was hit by a massive fine for misselling its insurance products.

Paul Stobart, chief executive of CPP, said: “We are deeply sorry for the errors and wrongdoings of the past and are paying a heavy penalty through what is a large fine.

“The next steps for the team are to complete the transformation programme and to rebuild our business and our reputation in the market.”

His comments came as senior politicians raised concerns about the impact on hundreds of York jobs, while the company’s share price soared.

The credit card and identity theft insurance group warned it would inevitably have to “reduce its cost base” in line with a new operating environment, and was considering the “most appropriate approach” to cutting costs.

York Central MP Hugh Bayley said he was worried about the short-term employment implications, although he said job losses were not inevitable and he dismissed speculation that the future of the whole company was in jeopardy.

“At least the FSA has made a decision and we have clarity and the company can be re-built,” he said. “I think it can remain market leader in a niche market, and that its market share can grow now that the FSA investigation is concluded.” He said the FSA had questions to answer about the damaging length of time the investigate had taken.

Council leader James Alexander said his concern lay in CPP’s continued presence in the city and for the staff it employed. “I will be contacting the chief executive Paul Stobart to talk to him about the company’s next steps and any support we might offer for staff and as a city.”

Tory group leader Ian Gillies said that although he hoped and trusted new products would be created and marketed, he was extremely concerned for the future of the company and its staff.

“CPP appear to have contravened the rules and have subsequently been punished,” he said. “Unfortunately, it is the employees who tend to bear the brunt of the penalties.”

CPP said the combination of an expected increase in costs, an anticipated decline of UK business as a result of FSA restrictions and lost business due to a likely decision by RBS not to renew a contract for mobile phone insurance would have a substantial adverse impact on the business in 2013 and beyond.

The fine is equalled only by one handed by the FSA to HSBC last December but CPP also expects to pay £14.5 million in redress to affected customers and has estimated that the total costs of the FSA’s investigation will rise to £33.4 million, while the group had previously set aside £24.9 million.

The FSA found CPP had sold card protection products to customers who did not need the cover and failed to explain the limited circumstances in which they would need it, and also overstated the risks of identity theft to sell another product.

Mr Stobart said the announcement marked the end of a long running investigation into historic practices in the UK. “The FSA Final Notice makes clear that, in the period to March 2011, there were significant failings in the systems and controls environment within CPP in the UK,” he said.

Tracey McDermott, the FSA’s director of enforcement and financial crime, said it had been a serious case, which had warranted its joint largest retail conduct fine and generated a sizeable bill for consumer redress.

“While CPP’s products were relatively inexpensive, they were sold widely and CPP encouraged its sales agents to be overly persistent,” she said.

“This exposed a very large number of customers to the unacceptable risk of buying products they did not want or need. Further, we had already warned the firm that it might be misleading customers about a feature of card protection from which customers were unlikely to benefit, but insufficient action was taken to rectify this.

“We have highlighted before our concerns about low cost insurance that offers little or no value to the customer. This case shows the action we will take if our warnings are not heeded.”

It is understood CPP believes it is too soon to comment on the job implications of yesterday’s announcement, but is committed to its York base.

Firm’s shares rally

SHARES in CPP soared yesterday as the conclusion of the long-running FSA investigation removed uncertainty which has been hanging over the business for the last 20 months.

CPP’s share price started the day at 18.69p, and at one point reached 32p, before finishing the day at 25.25p. The shares still had a long way to go before they reached the 300 pence level they held before the FSA probe began.

 

Company lured by talent and prime location

Mike Laycock recalls how The Press and its readers helped lure CPP to York - and examines the company’s recent travails.

“THIS is a fantastic piece of news for York.” That was how Paul Murphy, the man in charge of the city’s inward investment drive, hailed CPP’s decision in December 1998 to move its operations centre and 750 jobs to York from Chelsea, London.

The offices would go on the site of the former York carriageworks, which had closed down three years earlier with the loss of the remaining 750 jobs.

Mr Murphy revealed that the then Evening Press had helped secure one of York’s biggest employment coups in many years when 400 readers responded to a newspaper appeal in June for CVs from people interested in working for a then unnamed financial services company, which was considering coming to York.

The applicants’ quality helped convince CPP chairman Hamish Ogston it should plump for York, even though it could not offer the millions of pounds in grants and subsidies which competing cities had available.

Two other key factors played in York’s favour: the excellent living and working environment and good rail communications with London.

For more than a decade, CPP flourished, with the total number of York employees reaching about 1,000.

In March 2010, it was floated on the Stock Exchange with an offer price of 235p per ordinary share, giving it a market capitalisation of about £396 million.

But early last year, the company issued a shock profit warning as it revealed it was being investigated by the FSA over the sale of its card and identity protection products in the UK.

Its share price nosedived, Barclaycard stopped selling its identity protection and in February this year, CPP warned if it could not reach an agreement with the FSA, its viability would be under threat.

At the end of last month, CPP confirmed it was in takeover talks with an American company, Affinion Group Inc, after receiving an “initial, preliminary approach’ which might or might not lead to an offer being made for it, prompting senior councillors and MPs to raise concerns that any change of ownership might affect its continued presence in York.

Comments (21)

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10:50am Thu 15 Nov 12

GooseTrackLane says...

No sympathy for a horrible company. Shame that some staff will inevitably be made redundant.
No sympathy for a horrible company. Shame that some staff will inevitably be made redundant. GooseTrackLane
  • Score: 0

11:55am Thu 15 Nov 12

bloodaxe says...

Excellent company. They sorted out both key and card problems without any fuss. As for the FSA, would this be the same FSA which missed the RBS and Northern Rock derivative and sub-prime fiascos and which has been so ineffective that it is being wound-up itself ?
Excellent company. They sorted out both key and card problems without any fuss. As for the FSA, would this be the same FSA which missed the RBS and Northern Rock derivative and sub-prime fiascos and which has been so ineffective that it is being wound-up itself ? bloodaxe
  • Score: 0

12:04pm Thu 15 Nov 12

Diesel02 says...

This resolution with the FSA may have come too late for CPP. Who is going to sell their two new products when their business partners are being stung by the FSA as well? Not only that, they lost T Mobile and are about lose RBS mobile insurance. Correct me if i am wrong, CPP only have three main products. Card, ID and Mobile insurance. Card and ID are shot, and Mobile is about shot as well with no new busiess.

I agree with Goose, i really feel for the staff that will be made redundant (100+) in the new year. As FT articles say, the FSA did warn CPP.
This resolution with the FSA may have come too late for CPP. Who is going to sell their two new products when their business partners are being stung by the FSA as well? Not only that, they lost T Mobile and are about lose RBS mobile insurance. Correct me if i am wrong, CPP only have three main products. Card, ID and Mobile insurance. Card and ID are shot, and Mobile is about shot as well with no new busiess. I agree with Goose, i really feel for the staff that will be made redundant (100+) in the new year. As FT articles say, the FSA did warn CPP. Diesel02
  • Score: 0

12:13pm Thu 15 Nov 12

hifive says...

Feel sorry for the staff who will be affected but no sympathy for the company itself. During a brief stint of working there many tears ago I was put under tremendous pressure to cross sell products. Very underhand and untrustworthy.....
Feel sorry for the staff who will be affected but no sympathy for the company itself. During a brief stint of working there many tears ago I was put under tremendous pressure to cross sell products. Very underhand and untrustworthy..... hifive
  • Score: 0

12:29pm Thu 15 Nov 12

Omega Point says...

hifive , Was "tears agao" a slip or was it really that bad
hifive , Was "tears agao" a slip or was it really that bad Omega Point
  • Score: 0

12:47pm Thu 15 Nov 12

Piffadilly-Circus says...

Looks like them office boys are guna have to do 1 of 2 things..

go work in norwich union or nestle offices and become a secondry hero there.

Or start selling chesnuts near minster or icecreams near station
Looks like them office boys are guna have to do 1 of 2 things.. go work in norwich union or nestle offices and become a secondry hero there. Or start selling chesnuts near minster or icecreams near station Piffadilly-Circus
  • Score: 0

12:56pm Thu 15 Nov 12

inthesticks says...

I don`t feel sorry for ALL the staff, there`s a few with the morals of Goebbels who have taken home thousands in bonuses, prizes of cars and holidays for forcing little old ladies to have something they didn`t want or need nor could afford. They were encouraged and loved by management who in turn took home bonuses. Those who couldn`t bring themselves to be so selfish took home basic wage and were even disciplined for not performing.
This is the truth York Press and the ruling has been made by the FSA saying the same so please don`t remove comments this time.
I don`t feel sorry for ALL the staff, there`s a few with the morals of Goebbels who have taken home thousands in bonuses, prizes of cars and holidays for forcing little old ladies to have something they didn`t want or need nor could afford. They were encouraged and loved by management who in turn took home bonuses. Those who couldn`t bring themselves to be so selfish took home basic wage and were even disciplined for not performing. This is the truth York Press and the ruling has been made by the FSA saying the same so please don`t remove comments this time. inthesticks
  • Score: 0

1:13pm Thu 15 Nov 12

Bucktrout says...

So what was it they were acutally selling, and why was it misleading? Come on Press, some finer details please!
So what was it they were acutally selling, and why was it misleading? Come on Press, some finer details please! Bucktrout
  • Score: 0

1:23pm Thu 15 Nov 12

Piffadilly-Circus says...

inthesticks wrote:
I don`t feel sorry for ALL the staff, there`s a few with the morals of Goebbels who have taken home thousands in bonuses, prizes of cars and holidays for forcing little old ladies to have something they didn`t want or need nor could afford. They were encouraged and loved by management who in turn took home bonuses. Those who couldn`t bring themselves to be so selfish took home basic wage and were even disciplined for not performing.
This is the truth York Press and the ruling has been made by the FSA saying the same so please don`t remove comments this time.
Those who couldn`t bring themselves to be so selfish took home basic wage and were even disciplined for not performing.

Seems to be the york way sell off the lies and turn a blind eye. You cannot have moral's if you wish to sustain anything.
[quote][p][bold]inthesticks[/bold] wrote: I don`t feel sorry for ALL the staff, there`s a few with the morals of Goebbels who have taken home thousands in bonuses, prizes of cars and holidays for forcing little old ladies to have something they didn`t want or need nor could afford. They were encouraged and loved by management who in turn took home bonuses. Those who couldn`t bring themselves to be so selfish took home basic wage and were even disciplined for not performing. This is the truth York Press and the ruling has been made by the FSA saying the same so please don`t remove comments this time.[/p][/quote]Those who couldn`t bring themselves to be so selfish took home basic wage and were even disciplined for not performing. Seems to be the york way sell off the lies and turn a blind eye. You cannot have moral's if you wish to sustain anything. Piffadilly-Circus
  • Score: 0

1:24pm Thu 15 Nov 12

YorkieTalkie says...

Hmm, whilst there was some level of misselling which CPP recognises, I can't help but think this is another example of the FSA trying to show it has teeth, after being found wanting following their spectacular misses over recent years, including the alleged fixing of LIBOR rates, the impact of which will have affected millions directly or indirectly...

I sincerely hope CPP comes through this and emerges better for it; their products are useful (I have one), and they are a major employer in our fantastic city.
Hmm, whilst there was some level of misselling which CPP recognises, I can't help but think this is another example of the FSA trying to show it has teeth, after being found wanting following their spectacular misses over recent years, including the alleged fixing of LIBOR rates, the impact of which will have affected millions directly or indirectly... I sincerely hope CPP comes through this and emerges better for it; their products are useful (I have one), and they are a major employer in our fantastic city. YorkieTalkie
  • Score: 0

1:25pm Thu 15 Nov 12

whitehorse says...

Last thing York needs is redundancies, but I can recollect a brief time there. I was in my twenties and I remember being rebuked by a sixteen year old 'team leader' fresh out of school because I didn't sell stuff to people who didn't want it. The sales system played into the hands of the uncaring and morally corrupt.
Last thing York needs is redundancies, but I can recollect a brief time there. I was in my twenties and I remember being rebuked by a sixteen year old 'team leader' fresh out of school because I didn't sell stuff to people who didn't want it. The sales system played into the hands of the uncaring and morally corrupt. whitehorse
  • Score: 0

1:36pm Thu 15 Nov 12

CynicaloldGit says...

I don't feel sorry for the staff either.

I got a new debit card a couple of years ago and was only told I'd have to pay for this service (it looked as if it was a service as part of my bank) after 10 minutes of telling me all the details, and then only when a actually asked if I had to pay.
I don't feel sorry for the staff either. I got a new debit card a couple of years ago and was only told I'd have to pay for this service (it looked as if it was a service as part of my bank) after 10 minutes of telling me all the details, and then only when a actually asked if I had to pay. CynicaloldGit
  • Score: 0

12:02pm Fri 16 Nov 12

chickpea says...

Come on then FSA. It's not enough to just fine CPP. How about investigating it's business partners, the banks, who colluded with CPP to missell these products in the first place through its card activation lines?
Come on then FSA. It's not enough to just fine CPP. How about investigating it's business partners, the banks, who colluded with CPP to missell these products in the first place through its card activation lines? chickpea
  • Score: 0

12:23pm Fri 16 Nov 12

hifive says...

Omega Point wrote:
hifive , Was "tears agao" a slip or was it really that bad
Haha! Both!
[quote][p][bold]Omega Point[/bold] wrote: hifive , Was "tears agao" a slip or was it really that bad[/p][/quote]Haha! Both! hifive
  • Score: 0

1:27pm Fri 16 Nov 12

emmT says...

My heart goes out to the majority of hard working people providing for their families in the non ops area. The people who have not received cars, holidays and large bonuses for mis selling products. The company is not as portrayed a beacon of caring supportive employer, but quite the opposite, it openly allows bullying and harassment to take pace. Saddened that so many honest people are to be affected, but won't be sad to an end to the practices of this company!!!
My heart goes out to the majority of hard working people providing for their families in the non ops area. The people who have not received cars, holidays and large bonuses for mis selling products. The company is not as portrayed a beacon of caring supportive employer, but quite the opposite, it openly allows bullying and harassment to take pace. Saddened that so many honest people are to be affected, but won't be sad to an end to the practices of this company!!! emmT
  • Score: 0

1:46pm Fri 16 Nov 12

spyathome says...

Err, this is a totally crooked company. Its going bust. You would not put glowing article in the paper about some shyster pretending to be from the waterboard and robbing little old ladies. Why do it for a company? On a side note, as the FSA has pulled its finger out and is aggressively pursuing scam companies, how long do you reckon the Skelwith group and its tame IFA have?
Err, this is a totally crooked company. Its going bust. You would not put glowing article in the paper about some shyster pretending to be from the waterboard and robbing little old ladies. Why do it for a company? On a side note, as the FSA has pulled its finger out and is aggressively pursuing scam companies, how long do you reckon the Skelwith group and its tame IFA have? spyathome
  • Score: 0

4:57pm Fri 16 Nov 12

Tom6187 says...

I worked there for nearly two years and it is a totally corrupt company. I was pushed to sell to products to people especially the elderly and I just couldn't do it, if they said they didn't want it I tended to leave it but the management listened to random calls and if you were found to not be ramming it down peoples throats then they would discipline you.

One day they sent me to listen in to some calls from a top performing seller and all he did was badger old women until they couldn't stand any more and they just folded and said they would take the policy.

An awful bullying company with horrific management and they deserve everything they get, I do feel for some members of staff but leaving there was such a relief for me and many others so it might be a blessing to some of them.
I worked there for nearly two years and it is a totally corrupt company. I was pushed to sell to products to people especially the elderly and I just couldn't do it, if they said they didn't want it I tended to leave it but the management listened to random calls and if you were found to not be ramming it down peoples throats then they would discipline you. One day they sent me to listen in to some calls from a top performing seller and all he did was badger old women until they couldn't stand any more and they just folded and said they would take the policy. An awful bullying company with horrific management and they deserve everything they get, I do feel for some members of staff but leaving there was such a relief for me and many others so it might be a blessing to some of them. Tom6187
  • Score: 0

5:07pm Fri 16 Nov 12

PKH says...

I have very little sympathy for the company, the contact I had with their sales people I found them very pushy using scare tactics not wanting to take no for an answer, if I remember correctly I had to put the phone down on them. I have some sympathy for any decent staff they have.
I have very little sympathy for the company, the contact I had with their sales people I found them very pushy using scare tactics not wanting to take no for an answer, if I remember correctly I had to put the phone down on them. I have some sympathy for any decent staff they have. PKH
  • Score: 0

5:30pm Fri 16 Nov 12

Steve, says...

I have friends who worked there and didn't have positive views, I interviewed but when staff took a dim view of what I did in my own time (drinking in town on a weekend) I decided against working there. I know management there appreciate their fine wines on a night to wind-down so they're not telling me when I can and can't drink.
I have friends who worked there and didn't have positive views, I interviewed but when staff took a dim view of what I did in my own time (drinking in town on a weekend) I decided against working there. I know management there appreciate their fine wines on a night to wind-down so they're not telling me when I can and can't drink. Steve,
  • Score: 0

8:18pm Sat 17 Nov 12

Tom6187 says...

Steve, wrote:
I have friends who worked there and didn't have positive views, I interviewed but when staff took a dim view of what I did in my own time (drinking in town on a weekend) I decided against working there. I know management there appreciate their fine wines on a night to wind-down so they're not telling me when I can and can't drink.
CPP also employ someone full time to snoop on Facebook and twitter to see what their staff are getting up to, it really is a rotter of a company.
[quote][p][bold]Steve,[/bold] wrote: I have friends who worked there and didn't have positive views, I interviewed but when staff took a dim view of what I did in my own time (drinking in town on a weekend) I decided against working there. I know management there appreciate their fine wines on a night to wind-down so they're not telling me when I can and can't drink.[/p][/quote]CPP also employ someone full time to snoop on Facebook and twitter to see what their staff are getting up to, it really is a rotter of a company. Tom6187
  • Score: 0

1:07am Wed 28 Nov 12

Anonymous_WeAreLegion says...

I know first hand that both the company itself and the whole management team are corrupt. For e.g. harassment, bullying agents and having an overall god-complex attitude. Myself and anyone else who has worked there will agree, hence Mr Tom6187. As this small story unfolds over the next few months you will all see the cracks beginning to show and all the skeletons being let out of their closet. This company likes to think it is a squeaky clean 'customer centric' business but it's far from that. Yes, I feel sorry for many of the employers who are caught up in the mess they have made, but I guess CPP were not smart enough to realize what was about to happen and had their heads in the clouds. They started coming up with new product ideas, opening a new site and arranging 'Dream Award' trips to Las Vegas RIGHT after they heard they'll be getting a fine... And to add one last thing, Tom6187 was also correct regarding spying on agents via social networking. They do indeed monitor agents' Facebook and Twitter feeds to see what dirt they can find. PS the amount of 'high up' people that have come and gone speaks volumes.
I know first hand that both the company itself and the whole management team are corrupt. For e.g. harassment, bullying agents and having an overall god-complex attitude. Myself and anyone else who has worked there will agree, hence Mr Tom6187. As this small story unfolds over the next few months you will all see the cracks beginning to show and all the skeletons being let out of their closet. This company likes to think it is a squeaky clean 'customer centric' business but it's far from that. Yes, I feel sorry for many of the employers who are caught up in the mess they have made, but I guess CPP were not smart enough to realize what was about to happen and had their heads in the clouds. They started coming up with new product ideas, opening a new site and arranging 'Dream Award' trips to Las Vegas RIGHT after they heard they'll be getting a fine... And to add one last thing, Tom6187 was also correct regarding spying on agents via social networking. They do indeed monitor agents' Facebook and Twitter feeds to see what dirt they can find. PS the amount of 'high up' people that have come and gone speaks volumes. Anonymous_WeAreLegion
  • Score: 0

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