What the credit card insurance compensation agreement means

By Marianne Curphey

Customers who were mis-sold certain types of insurance with their credit cards are eligible for compensation, under a package announced by the Financial Conduct Authority (FCA).

The ruling, which affects anyone who bought the insurance between 2005 and 2011, involves 13 high street banks and credit card issuers who referred customers to an insurance company called Card Protection Plan Limited (CPP). The banks and issuers, along with CPP, have agreed to compensate customers who were mis-sold card protection and identity protection services.

How did this happen?
Customers who received a new or replacement credit card or debit card were sometimes asked to call a number to activate it. When they rang this number, they were often offered unnecessary card protection or identity protection services. In fact, these protections were usually already covered under the terms and conditions of the bank or card provider.insurance-compensation

What are the names of the policies involved in the latest compensation package?
CPP's Card Protection product was also known as Card Guard (offered by HSBC); Card Safe (offered by M&S Money); Barclaycard Card Protection; Barclays Cardholder Protection; NatWest Card Protection; Egg Emergency Cover; Card Protection Plus and Commercial Card Protection (which were sold by CPP and a number of its business partners).

Who's affected?
The FCA estimates around 7 million people are eligible for compensation. The agreement covers policies sold after  Jan. 14, 2005, when the Financial Services Authority (the FCA's predecessor) started regulating this market. The FSA said the mis-selling took place between then and March 2011.

Anyone who bought Card Protection, which cost about £30 a year, or Identity Protection, which cost around £80 a year, is likely to receive compensation. The FCA says total compensation will be around £1.3 billion, which averages out to about £185 per customer.

How will they work out compensation?
If you are affected, you will be entitled to the amount you have paid for your policy since Jan. 14, 2005, less any money paid out by the policy, plus 8 per cent interest on the amount owed to you.

What do I need to do to get it?
You don't need to do anything at this stage. CPP will get in touch with customers, beginning August 29.

The initial letter will explain how the compensation will work. A second letter will ask you to vote on whether you approve of the deal (the majority of customers replying have to vote in favour of the scheme in order for the compensation package to go ahead). Then you will be sent a simple claim form to fill in.

How long it will take?
After the autumn vote, the first payments will likely arrive in spring 2014. There are a number of administrative and legal issues to sort out before the payments are made.

Once the vote goes through and the High Court approves the plan, customers will complete a simple claim form. You won't need to use a claims management company or pay for legal help to claim compensation. The claim shouldn't cost you anything.

What if I bought my policy before 2005?
You should approach either your bank or CPP directly and make a claim. You will need your old paperwork as evidence. If you are unhappy with their response then, as a last resort, you could take your case to the Financial Ombudsman Service.

What else do I need to know?
Most people will want to make a claim. However, if you make a claim, your policy will be cancelled. This will happen even if your claim is rejected. Therefore, you may want to think carefully before making a claim.

How is this different from PPI?
Payment protection insurance (PPI) was mis-sold with credit cards and other financial products and the compensation scheme for this is now well underway. According to FCA figures, during May 2013, £422 million was paid back to customers who complained about the way they were sold PPI.


Published: 30 August 2013