New compensation scheme for lost/stolen card protection policies
A new compensation scheme has been agreed between 11 banks and credit card issuers and the Financial Conduct Authority (FCA), to reimburse customers who were sold card protection policies that were, essentially, useless. This is separate from the ongoing card protection policy claims, as this centres on one policy issuer offering protection that was totally not required.
An estimated two million affected bank customers will be sent a letter in April or May, asking them to vote in favour of the compensation scheme, which could see people receiving up to around £300 each.
The policies in question were offered by a company called Affinion and sold by the banks and credit card firms. The FCA explained that one unnecessary element of the insurance covered losses due to the fraudulent use of a card that had been lost or stolen. "This was unnecessary because the customer's card issuer was typically responsible for any transactions after the cards were reported as being lost or stolen and, in the period before reporting the matter, customers were only liable for unauthorised transactions in limited circumstances," the regulator said, adding that "the bank or card issuer usually covered customers for anything over the first £50 if transactions took place before the card was reported missing."
As a result the policies, which went under the names such as Card Protection, Sentinel, Sentinel Gold, Sentinel Protection, Sentinel Excel and Safe and Secure Plus, were essentially charging customers for protection they already had, and it is this element that is being reimbursed. An average policy cost £25 a year and the compensation will also accrue interest of 8% a year, minus any taxes and any money actually paid out on successful claims, meaning people could get up to £300.
This new scheme follows a similar compensation payout made last year for similar policies offered by CPP, who were fined £10.5m in 2012 by the FCA's predecessor, the Financial Services Authority (FSA), after using deliberate mis-selling tactics to trick people into thinking they needed the insurance cover.
Tracey McDermott, director of supervision and authorisations at the FCA, said: "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. "
The 11 banks and card issuers involved are:
AIB Group (UK) trading as First Trust Bank in Northern Ireland and Allied Irish Bank (GB) in Great Britain
Capital One (Europe)
Northern Bank Limited trading as Danske Bank
Tesco Personal Finance
The Co-operative Bank
The Royal Bank of Scotland.
The scheme will not cover bank customers who had a card insurance policy as part of a packaged bank account.