Are you eligible for compensation
for mis-sold fraud protection?

By Michael Lloyd

About two million credit card holders can claim compensation for the latest in a line of credit products that have been mis-sold: credit card fraud protection insurance.

Affinion International sold the insurance policies as protection against fraud if a credit card was lost or stolen. The problem: banks and card issuers already provide this type of protection free, making the additional insurance redundant. This follows other mis-sold product schemes, such as that of Card Protection Plan Limited, which mis-sold products from 2005 to 2014.

Here's how to determine if you are eligible for compensation in the fraud insurance scheme and how to file for it if you are.

How the insurance was sold
Banks often offer packaged bank accounts, which typically offer benefits such as insurance cover and preferential overdraft rates for a monthly fee that can range from £5 to £25.insurance-compensation

However, increasing numbers of people claim banks used aggressive sales tactics to push these accounts onto customers who either didn't qualify for the benefits included, or had no use for them at all, as is the case with the credit card fraud protection.

According to the Financial Ombudsman Service's (FOS) six-monthly complaints data report, complaints about packaged banking accounts
in the first half of 2015 drove up the FOS banking workload by two thirds
compared to the previous six-month period.

Are you eligible for compensation?
A separate company called AI Scheme Unlimited will deliver the consumer redress scheme on behalf of Affinion International, banks and card
providers. The AI Scheme will send letters and compensation forms to
approximately two million customers by mid-September 2015.

If you receive a letter, you must determine if you feel you've been affected by mis-sold products. For many, packaged bank accounts can be a great way of saving a few quid by not paying for separate insurance products or pricy overdraft fees. Spending £10 a month on a bank account that offers travel, breakdown and mobile phone insurance is a good deal -- if you're going to use the coverage.

"With packaged bank accounts, it's worth noting that for many of the people we speak to and in several of the complaints we see, the actual account was not a bad product to have," an FOS spokesperson said in response to emailed questions.

However, if you were sold one on the strength of useless benefits, such as credit card protection, you may be eligible to claim compensation.

If you feel you were mis-sold products and are not contacted, it may be that you were victim to a different mis-selling scheme.

You might be able to seek a pay-out for being mis-sold a packaged bank account in any of the following circumstances:

  • You were sold useless credit card protection as part of your packaged account.
  • Upon trying to make a claim on a linked insurance plan, you discovered you were not covered for something you were told was included in your plan, or discovered you were ineligible to make a claim based on personal circumstances such as age or medical history.
  • A bank signed you up and charged you for a packaged bank account without your permission, or refused to cancel an account.
  • You were told that signing up for a packaged account was compulsory or that there was no free alternative.
  • The person who sold you the account stated or implied that signing up for it would be the only way to access other financial services or improve your credit rating when this was not the case.

"I think overall we would encourage consumers to have a real think about whether the extras that were packaged with the accounts were right for them [when considering filing for compensation]," the FOS spokesperson said.

How to file for compensation
You can complete the compensation form mailed to you by AI Scheme Limited before 18 March 2016. You should not use or pay a claims management firm to handle your claim on your behalf.

If your claim is successful, you can expect all your monthly fees refunded, plus interest. When you consider that these types of accounts can cost up to £300 a year, you could be looking at a pretty decent sum.

In the event that your bank rejects you, you'll have the option to refer your complaint on to the FOS. For more information, you can refer to the Financial Conduct Authority's (FCA) website.

Published: 8 September 2015