Mis-sold Credit Card Insurance Means Millions are set for Compensation
Posted on: February 2nd, 2015 | Author: crystaladmin
Mis-sold Credit Card Insurance
Millions of bank customers who were mis-sold credit card security products could be in line for compensation after the FCA reached a voluntary agreement with 11 high street banks and insurance provider Affinion.
The regulator says around two million customers will receive a letter from the compensation scheme, called ‘AI Scheme Ltd’, giving information about making a claim against their bank.
FCA director, Tracey McDermott says: “If approved, this scheme will provide those who may have concerns about the way their card security product was sold to them with a simple and free way to claim compensation.” She went on to say, “We have been encouraged that, working closely with the FCA, a large number of firms have voluntarily come together to create a redress scheme that will provide a fair outcome for customers. Such a willingness to take steps to resolve historic problems is an important step to restoring trust in the financial services.” the regulator said.
It is not yet clear how much compensation the banks could have to pay out in total, although the average cost of the card security product was £25 per year.
The plan has been agreed by the Financial Conduct Authority (FCA) and 10 banks and credit card issuers:
The policies, typically costing £25 a year, promised to reimburse customers for fraudulent transactions if their cards were lost or stolen, and earned banks substantial commission. But they were largely pointless as the banks were already obliged to cover customers for losses.
The policies, produced by a company called Affinnion, were sold by banks and credit card providers between January 2005 and August 2013 under the names Card Protection, Sentinel, Sentinel Gold, Sentinel Protection, Sentinel Excel and Safe and Secure Plus.
The compensation deal is separate to the £450m package agreed for customers of CPP in 2014, a similar card protection product sold by the banks to 2.3 million people.
The Financial Conduct Authority (FCA) said: “Our view is that customers did not need this cover, as their bank or card issuer is typically responsible for any transactions after they tell it their card has been lost or stolen.”
Customers will receive their money back, plus interest at 8% a year.
Compensation is dependent on customers approving the “AI Scheme” at a vote in spring, with payouts expected towards the end of 2015.
The scheme will not cover those who had a card security product as a benefit within a packaged bank account. However, affected customers will be sent a letter in April or May, asking them to vote in favour of the compensation scheme. The plan to compensate Affinion customers follows a similar but much larger exercise involving seven million people who had been mis-sold similar card and identity protection policies by a company called CPP. If all those customers had claimed they would have been in line for compensation amounting to £1.3bn.