The Financial Conduct Authority has reached an agreement with 12 ‘card protection’ providers that will pave the way for around 2m customers to claim compensation .
While an agreement has been reached with the FCA on the nature of the proposed compensation scheme, it must be voted on by eligible customers and formally approved by the High Court before compensation can be paid.
A majority of customers who vote will need to do so in favour of the scheme for this to happen, meaning compensation is expected to be paid later this year.
About 2m customers will receive an initial letter from a company called AI Scheme giving more information about the process. AI Scheme has been set up to promote and deliver the scheme.
The total amount of compensation paid out will depend on how many eligible customers decide that they wish to claim compensation and the length of time they held the product. The average annual cost of the card security product was £25.
One of the features of the card security products was insurance to cover fraudulent use if a card was lost or stolen.
However, the regulator said 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 six products that can be claimed on are Card Protection, Sentinel, Sentinel Gold, Sentinel Protection, Sentinel Excel and Safe and Secure Plus
The scheme is being proposed following collaborative discussions between the FCA, Affinion and the banks and credit card issuers, about how to resolve these issues.
The issuers and providers who have entered the scheme include:
• AIB Group trading as First Trust Bank in Northern Ireland and Allied Irish Bank (GB) in Great Britain;
• Barclays Bank;
• Capital One (Europe);
• Clydesdale Bank;
• Northern Bank trading as Danske Bank;
• Tesco Personal Finance;
• The Co-operative Bank; and
• The Royal Bank of Scotland.
Tracey McDermott, director of supervision and authorisations at the FCA, said: “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.
“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.”