Herbert Smith Freehills has advised Card Protection Plan Limited (CPPL), a subsidiary of CPPGroup Plc (CPP), on its ground-breaking scheme of arrangement which is to be used as a means of paying redress to eligible customers who purchased certain of the company's products. This is the latest stage in the ongoing advice Herbert Smith Freehills has been providing to the CPP Group on a range of corporate, finance, regulatory and restructuring matters since being engaged in May 2012.
CPPL is an insurance intermediary regulated by the Financial Conduct Authority (FCA). Its two core products are a card protection product which assists customers if a credit or debit card is lost, stolen or used without authorisation, and an identity protection product which assists customers if they are a victim of identity fraud. The products were sold either directly by CPPL, to customers introduced to CPPL by business partners with whom the company had entered into commercial contracts, or (in relation to the card protection product only) directly by business partners.
In May 2011, the FCA's predecessor the Financial Services Authority (FSA) commenced an investigation into CPPL following concerns regarding the potential mis-selling of its products. Following discussions with the FSA in early 2012 CPPL agreed to carry out a past business review to contact and offer redress to customers who had suffered loss as a result of a sale or renewal of a card protection product sold directly by CPPL after January 2005 or an identity protection product sold directly by CPPL through a telephone sales channel. Following discussions in 2012 between the FSA and five of CPPL's largest business partners, CPPL agreed to extend the past business review so as to cover sales of the card protection product by certain business partners directly and sales of both products where a relevant business partner had introduced the customer to CPPL (this only applied to telephone sales of the identity protection product).
Herbert Smith Freehills advised CPPL on the feasibility of using a solvent scheme of arrangement for this co-ordinated redress programme and its terms of implementation. Linklaters advised five of the participating business partners.
The terms of the scheme have been approved by the FCA, which has also bound the Financial Ombudsman Service to the terms. 13 of CPPL's largest business partners, the majority of which are high street financial institutions, have also agreed to be bound by the terms of the scheme (without any admission of liability).
Herbert Smith Freehills has advised on a range of matters arising from CPP's discussions with its lenders and its major shareholder over the last 15 months, including on the class 1 disposal of the Group's North American business in May 2013 and the connected refinancing transaction, the possible offer from its major shareholder and the recent refinancing completed in July 2013. Herbert Smith Freehills has also advised CPP in relation to the FSA's investigation and the settlement reached with the FSA in November 2012.
The Herbert Smith Freehills team has been led by Corporate partner Greg Mulley, with Restructuring and Insolvency partner Kevin Pullen leading the advice in relation to the scheme of arrangement and restructuring matters. Simon Chadney has led in relation to the refinancings, Laurence Elliott has advised the board of CPPL on restructuring and insolvency matters and Jenny Stainsby is leading on financial services regulatory matters. They were assisted by of counsel Debbie Standring, senior associates Jonathan Stanley, Davendip Virk and Mark Cooper and associates Shaun Williamson, Ruth Patterson, John Chetwood, Celine Chan, Ajay Malhotra and Wendy Saunders.
Greg Mulley commented:
"We have been delighted to assist CPP across a range of practice areas as it has navigated through some very challenging issues and transactions over the last 15 months and are particularly pleased to have been able to help achieve this latest milestone on the path to rebuilding the Group."
Kevin Pullen commented:
"This scheme of arrangement is one of the largest ever agreed in the UK, involving as it does some seven million retail customers, and it was pleasing to be involved in such a ground-breaking deal."
