Credit card insurance compensation: could you be due a pay-out?

posted by in Living with debt

Another case of insurance mis-selling has hit the headlines recently. As many as 2 million people in the UK may be entitled to claim compensation after being sold unnecessary fraud protection insurance for their credit card.

According to the Financial Times, 11 banks and credit card providers marketed the insurance from Affinion International Limited. These policies offered cover against the fraudulent use of lost or stolen credit cards for around £25 per year.

Taking out this extra insurance was unnecessary and meant that customers faced extra costs. Without insurance, customers are usually only responsible if their credit card is used for unauthorised payments of less than £50. Even then it’s paid only in certain circumstances, and only before they report the card lost or stolen.

The Financial Conduct Authority (FCA), the body which regulates the industry, hasn’t conducted a formal investigation, and Affinion hasn’t admitted any liability. However Affinion and a range of well-known banks have agreed to take part in the scheme to compensate customers who may have been affected.

How do I know if I can claim compensation?

First of all, you should check whether or not you bought or renewed one of the following Affinion products between January 2005 and August 2013:

  • Card Protection
  • Sentinel
  • Sentinel Gold
  • Sentinel Protection
  • Sentinel Excel
  • Safe and Secure Plus

If the Affinion insurance was sold to you by one of the following banks, you could be eligible to apply for compensation:

  • AIB Group (trading as First Trust Bank in Northern Ireland, and Irish Bank in Great Britain)
  • Barclays
  • Capital One
  • Clydesdale
  • HSBC
  • Lloyds
  • Northern Bank (trading as Danske Bank)
  • Santander
  • Tesco Personal Finance
  • The Co-Operative Bank
  • The Royal Bank of Scotland (RBS)

The amount you could get back will depend on the product you bought and how long you had it for. To help MoneySavingExpert.com has calculated that what you could be looking at receiving is between £27 and £243.

I think I’m eligible! How do I claim compensation?

Letters are currently being sent out by AI Scheme Limited, the company that’s been set up to handle the compensation claims. The letter contains a form you can fill in and return to submit your claim, which you need to do before 18 March 2016.

If you haven’t received a letter but think you should’ve done, it could be that they don’t have your most up-to-date contact details. If this is the case, you should call AI Scheme on 0800 678 1930.

For examples of what the AI Scheme letter will look like and what to write on your claim form, MoneySavingExpert.com has a useful guide.

I’m eligible for compensation and I’m a StepChange Debt Charity client – what should I do?

Depending on what solution you’re on, if you receive compensation you may need to get in touch with us.

If you’re on a debt management plan (DMP) or token payment plan (TPP)…

The compensation is likely to be a small amount, so you won’t be expected to pay this money into your plan. If you get a larger amount of compensation you can get in touch with us for advice on what to do with it.

If you’re on a debt relief order (DRO)…

If you’re on a DRO and receive compensation, you’ve got to let your official receiver (OR) know. Your DRO usually won’t be revoked as long as the compensation you receive is under £700 and counts for less than 50% of your total debt.

 If you’re on an individual voluntary arrangement (IVA) or trust deed…

If you’re on an IVA or trust deed, you should let your supervisor or trustee know that you’ve been given compensation.

If you’re bankrupt or have gone through sequestration…

If you’re bankrupt and receive compensation, you’ll need to make your official receiver (OR) or Accountant in Bankruptcy (AiB) aware. You’ll have to pay them any refund you’re given, but you may be able to keep hold of the £50 compensation for distress.

If you’re involved in any other debt solution with us, please contact us for advice.

I’m struggling with credit card debt, what should I do?

If you’ve got a credit card and are struggling to make repayments, we’d recommend you seek free debt advice.

Last year we gave free debt advice to nearly 600,000 people, including Rosie* from Leicestershire (not her real name), who found she couldn’t keep on top of her credit card bills.

“I was running out of money, so was relying on credit cards to go spending. Before you know it you’re filling up the car with petrol and doing the food shopping all on credit card”

Rosie got in touch with us and we looked at how we could best help her. She’s now on a debt management plan (DMP), which helps her to make affordable repayments towards her credit card debt.

If you’re struggling with credit cards or other debts, get in touch with us for free debt advice.

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Laura Davies joined the MoneyAware team in May 2014 from a background in public relations. Outside of work, Laura enjoys travelling, reading, drinking tea and spending too much time on Buzzfeed.

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