CPP loses Barclaycard business over FSA investigation

CPP loses Barclaycard business over FSA investigation

Shares in CPP, a provider of credit card insurance and identity theft protection, plummeted yesterday after Barclaycard decided to stop using some of its services because of an FSA investigation.

The York-based firm revealed late last month that it is in "discussions" with the City watchdog over "alleged failings in sales calls with customers" amidst concerns staff were exaggerating the risks of identity theft.

CPP suspended new sales of its Identity Protection product and outlined plans to redesign it and have it ready for sale in around six weeks.

However, the company warned the issue was likely to see this year's earnings reduced with operating profit expected to be below the lower end of analysts' estimates, sending shares plummeting nearly 50%.

Now, it has been dealt another blow, revealing that Barclaycard has decided to stop "sales in the call to confirm channel" - a practice that sees customers who call in to confirm receipt of their newly issued credit card offered CPP card and ID protection products.

CPP says this part of its work with Barclaycard accounts for less than two per cent of revenue but the loss will hit profits after 2012, forcing shares to fall another 14% yesterday.

In a statement, CPP says it is continuing to work with the FSA and insists it has been "encouraged by the support received" from its other partners, which include Royal Bank of Scotland and Santander.

Meanwhile, Peter Vicary-Smith, CEO of consumer group Which? has welcomed the FSA's investigation, saying: "ID theft insurance is a product that most people will never use yet hundreds of thousands of policies have been sold, which raises serious questions about the sales practices being employed. We wrote to the FSA last year asking it to investigate ID theft insurance sales after several of our members contacted us with concerns about how it was sold to them, so it's good to see action being taken."

CPP has come under fire for its claims on the prevalence of card fraud before. In 2009 Apacs rounded on the firm accusing it of using "misleading information and spurious statistics" to support a claim that over 12 million Brits - one in four of the population - have fallen victim to credit or debit card fraud.

This morning shares in the company are trading at 129.95 pence, compared to a year high of 329 pence.

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