Millions offered card insurance compensation
Cardholders who were wrongly sold security products may be entitled to financial compensation.
Around two million people who may have been mis-sold card protection may be able to claim compensation.
The Financial Conduct Authority (FCA) has reached an agreement with Affinion International Limited and 11 banks and card issuers to cover the cost of compensation for the 'unnecessary' insurance policies, which covered the loss or theft of bank cards.
Letters will now be sent out to affected customers asking them to vote in favour of the compensation scheme.
The compensation scheme
Affinion and the following high street banks and card issuers have agreed to take part and will provide the money needed to cover compensation payments:
- AIB Group (UK) PLC trading as First Trust Bank in Northern Ireland and Allied Irish Bank (GB) in Great Britain
- Barclays Bank PLC
- Capital One (Europe) PLC
- Clydesdale Bank PLC
- HSBC Bank PLC
- Lloyds Bank PLC
- Northern Bank Limited (trading as Danske Bank)
- Santander UK PLC
- Tesco Personal Finance PLC
- The Co-operative Bank PLC
- The Royal Bank of Scotland
The decision to offer compensation needs to pass through eligible customers and formally approved by the High Court before any compensation can be paid. Around two million eligible product holders will be contacted from the end of this month. The letter will explain how the compensation scheme works and what people can do next.
Another letter, arriving in April or May, will include an invitation for them to vote for or against the action along with details on how to vote.
The total compensation paid out will depend on how many people decide to claim and the length of time that they held the product. The average annual cost of card security was £25. Compensation will accrue interest of 8% a year, and covers policies taken out between January 2005 and April 2013, so some people may be in line for payouts of hundreds of pounds.
If the compensation scheme is approved, all voters (even those who voted against) will be able to submit a claims form. You’ll be written to once again during August or September to ask whether you want to be considered for compensation.
Back in 2013 cardholders who had insurance policies with a firm called CPP, which was deemed similarly unnecessary, were also awarded compensation.
Compare credit cards with lovemoney.com
'Unnecessary' insurance
Essentially, the insurance products were pointless.
The regulator highlighted that one feature of the card security products was insurance to cover fraudulent use if the card was lost or stolen. But that cover was unnecessary as the customer’s card issuer was usually responsible for any transactions after the cards were reported lost or stolen.
Before being reported, customers were only liable for unauthorised transactions in limited circumstances. And the bank or card issuer usually covered customers for anything over the first £50 if transactions took place before the card was reported missing.
Compare credit cards with lovemoney.com
More on claims:
Regulators must do more to stop dodgy claims firm cold calls
Comments
Be the first to comment
Do you want to comment on this article? You need to be signed in for this feature