How the Financial Ombudsman is handling credit card protection mis-selling claims

The Financial Ombudsman Service has released details of how it's handling complaints about card protection insurance mis-selling.

Recently I wrote about how you can get your money back for mis-sold debit or credit card-protection policies and identity-theft cover. Read Credit card protection mis-selling: how to claim your compensation.

Today we are going to look at how the Financial Ombudsman Service has been dealing with complaints about this insurance and fraud when the card customer has no insurance.

About the Financial Ombudsman Service

The Financial Ombudsman Service deals with complaints about mis-selling of financial products, poor service or advice that isn't up to the standard that you should expect, such as an insurer failing to pay a legitimate claim, a bank transaction error or advice to invest in riskier investments than is appropriate for your attitudes and needs.

The Ombudsman can force financial companies to reimburse you or otherwise to put things right, such as correcting entries on your credit report. It can also force the financial company to pay you a little bit of compensation for stress and inconvenience.

It's an informal service that is easy to handle by yourself and means you don't need to take a case to court.

How the Ombudsman deals with card-protection complaints

The Ombudsman has been finding in favour of customers a massive 76% of the time in disputes about card protection. Here are some of the ways that it has settled disputes about the policy and about card fraud and identity theft in general.

Don't get confused

Mr B had his credit card for four years before he noticed he was paying for protection he didn't recognise. He complained to the card provider that he had been mis-sold “PPI”. When the provider told him he had no PPI, he complained to the Financial Ombudsman Service.

The Ombudsman found that the cover Mr B had been paying for was not the much-castigated payment protection insurance (PPI), which has been in the news a lot in the past few years, largely for mis-sales. It is supposed to pay your monthly debt repayments if you become ill or injured, or if you are made redundant.

Instead, Mr B had a card-protection policy, which protects you from fraud. However, the card provider admitted it handled the complaint badly and could have looked into the complaint further. It accepted that Mr B was simply unhappy about that the policy that had been added to his account.

The business refunded all the charges that had been put on Mr B's account and paid £100 in compensation.

Persuasive telephone sales

Mr T called the number he was given by his bank to activate his new credit card and, despite not being sure he needed it, he was persuaded to take out a card-protection policy to defend himself against fraud and ID theft.

Much later he realised how much the policy was costing him. When he complained, he was told that he had agreed to take out the cover.

Mr T then contacted the Ombudsman who found that he had been encouraged to take out the policy based on the threat of ID fraud, but, when they looked at the terms and conditions of the policy and compared it with those of the credit card, they found that Mr T was already covered under his credit-card agreement.

The bank agreed to refund all the premiums and 8% simple interest.

Don't store your PIN in your wallet

Mr A had his wallet stolen, but unfortunately he didn't report it immediately. In between £1,500 was stolen through cash machines and transactions. His bank thought it more likely that no fraud had been committed, so Mr A complained to the Ombudsman.

The Ombudsman saw the audit trail from the banks, which showed that the thief had tried to enter the same PIN using every card in Mr A's wallet. The money was stolen from an account that Mr A used only once in 18 months. The Ombudsman thought it likely that Mr A had kept a copy of the PIN in the wallet as a reminder and so it rejected his claim.

Even if Mr A had taken out a card-protection policy, it wouldn't protect him from his own carelessness.

Keep a close eye on your bank statements

Mr G was looking back over his credit card statements and noticed fraudulent transactions totalling nearly £1,000 from nearly a year earlier. His bank agreed the transactions were probably fraudulent, but said he should have complained earlier, since it was too late to under the rules of the credit card scheme to charge the money back.

Mr G told the Ombudsman it had taken a year to spot the transactions because he receives quarterly statements and checks them once a year for his tax return only. The Ombudsman thought this was a reasonable explanation for the delay. The firm finally agreed to refund the transactions to his account.

Note that Mr G got this result even without card protection insurance.

You have protection without card protection

Rory Stoves of the Ombudsman said: “While card protection insurance can be useful for some people, in many of the cases we see the consumer neither wanted nor required the cover.

“There are a number of provisions in place that provide you with some protection if your identity is stolen – so don’t feel pressured into taking out an insurance policy on the spur of the moment.”

More from Lovemoney:

Credit card protection mis-selling: how to claim your compensation

CPP fined £10.5 million for mis-selling credit card insurance

The UK's identity fraud hotspots revealed