Under the terms of the proposed damage control reimbursement strategy, the banks and credit card issuers will have to pay the amount to settle the latest mis-selling scandal, as reported by the Financial Times.
The banks, who referred the affected customers to a specialist life assistance firm CPP are concerned about the compensation plan. CPP has already agreed to pay a monetary penalty of £10.5m to regulators for mis-selling.
It is expected that the British lender Barclays will have to disburse the major chunk of the compensation of approximately £300m, as it holds the largest share of the credit card market in the country.
MBNA, HSBC and Santander UK will also pay for the proposed compensation plan.
Previously, the UK Financial Conduct Authority (FCA) said that the customers should be compensated if they were "given misleading or unclear information", such as overstated risk of identity theft.
"This was a product that no one needed to buy," one bank insider told the news agency.
"It was always totally unnecessary because any losses from identity theft are borne by the bank not the individual anyway."
All parties declined to comment on the issue, which is the third mis-selling scandal to hit Britain’s banks in recent times.
