Around seven million people are set to share up to £1.3bn in compensation after 13 high street banks and credit card companies agreed to offer redress for mis-sold credit card and identity theft protection.
The Financial Conduct Authority (FCA) said banks and credit card firms, together with card insurer CPP Group, have agreed to a compensation package which will see millions of customers contacted by CPP. Major lenders including Barclays, HSBC, Royal Bank of Scotland and Lloyds Banking Group have signed up to the compensation scheme, which is a new blow for the banking industry after the multibillion-pound payment protection insurance (PPI) scandal.
FCA boss Martin Wheatley said: "We believe this will be a good outcome for customers who may have been mis-sold the card and identity protection policies."
If customers are due compensation, they will be entitled to the amount paid for their policy since January 14, 2005, plus 8% interest.
Card protection, which cost around £30 a year, and identity protection, which cost about £80 a year, were "widely mis-sold" by York-based CPP, the FCA said.