Banks are to issue refunds to roughly two million customers who were missold insurance on their bank cards. According to the Financial Conduct Authority (FCA), the forms needed to claim compensation are to start being sent to the relevant customers before the end of this month.
Any talk of banks refunding customers due to a misselling scandal is likely to bring the matter of PPI to mind, and indeed there are similarities. Many of the customers who have been refunded PPI payments were missold cover for eventualities that were already protected. Much the same happened here, with customers being sold additional insurance cover on their bank cards when in fact their banks already provided such cover without the need for an additional policy.
However, with only around two million customers affected and the highest individual claims expected to be roughly £270, the scale of this is much smaller. The well-publicised PPI scandal saw banks set aside billions of pounds to compensate millions of customers, with some claims reaching into the thousands of pounds.
Most major banks took part in misselling this insurance, but the cover was provided by a third party company. Affinion International provided the missold policies, which were marketed under a number of names including:
The FCA has said that customers will begin receiving their compensation forms this month, though some will not get them until September. The deadline for completing and returning these forms is 18th March 2016.
Compensation is to be paid under the Redress Scheme, also called A1, which the FCA stressed is the only official channel through which compensation can be claimed. Those who purchased a product and were missold insurance policies between January 2005 and August 2013 are covered by the Redress Scheme, which received High Court approval last month.
Some customers may have been missold these products before 2005, but unfortunately these customers are not officially covered by the scheme. Those who believe they have been missold insurance on a bank card before 2005 are advised to complain directly to their provider.
Previously, a similar scandal emerged involving similar products sold by a separate firm, CPP. When news of this misselling scandal came out in 2012, the Financial Services Authority (FSA), the precursor to the FCA, fined CPP £10.5 million and ordered the firm to compensate those customers who had been missold cover. The final claims were handled under the CPP scheme in February of this year.