Will I get compensation for being sold worthless credit card protection?

http://www.theguardian.com/money/2015/aug/20/compensation-credit-card-protection-ai-scheme

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Two million people are set to receive cheques for up to £270 each after being sold worthless credit card protection insurance. An official compensation scheme has been set up and letters inviting people to claim the cash are starting to land on doormats.

City regulator the Financial Conduct Authority this week fired the starting gun on the mass payout, which could run into hundreds of millions of pounds. It relates to policies produced by a company called Affinion International and sold by leading high street banks and credit card companies.

What’s this all about? It involves card protection plans that were sold by nearly all the big banks. Often branded Sentinel, they usually cost about £25 a year and most people renewed annually. They were sold to those with bank accounts and credit cards, but this scheme only applies to policies sold on credit cards between 14 January 2005 and August 2013. Even if you no longer have the product, you may still be entitled to compensation.

What was the problem? These plans typically offered benefits supposedly designed to help if your card was lost or stolen. A big selling point was that they promised to reimburse customers for fraudulent transactions. But this cover was largely unnecessary because in the majority of cases the customer’s bank or card provider was responsible for fraudulent purchases after their card was reported lost or stolen. Also, the bank or credit card firm usually covered people for anything over the first £50 if the fraudulent transactions took place before the card was reported missing.

The scheme “is intended to compensate those whose decision to purchase the card security product may have been influenced by the fraud protection feature”.

How do I know if I’m affected? If you bought a card protection product with one of the names listed below from a bank, credit card provider or direct from Affinion, you may be entitled to compensation. Policies were branded Card Protection, Sentinel, Sentinel Gold, Sentinel Protection, Sentinel Excel, and Safe and Secure Plus.

The banks and card firms that have agreed to finance the payouts are Barclays, HSBC, Lloyds, Royal Bank of Scotland, Santander, the Co-operative Bank, Tesco Bank, Clydesdale Bank and Capital One, plus AIB Group (UK), trading as First Trust Bank in Northern Ireland and Allied Irish Bank (GB) in Britain, and Northern Bank, trading as Danske Bank.

What do I have to do? Nothing. Letters and compensation claim forms are being sent to eligible customers between now and mid-September by AI Scheme Limited, a company set up to run the scheme. The first payments – in the form of cheques – are expected to be made from late September. AI Scheme says: “We will endeavour to send the compensation to most customers within eight weeks of us receiving your form.”

The completed claim form must be sent back by 18 March 2016.

How much will I get back? Assuming you are entitled to compensation, you will get back the total amount you have paid for the plan since 14 January 2005, less any money paid out, plus 8% interest a year on the amount owed. It is thought that the most people will get is around £270. If you are owed less than £5, you won’t receive anything.

What if I think I should get a letter, but one never arrives? If you think you may be eligible and haven’t received a letter by the end of September, get in touch with the scheme. The freephone number is 0800 678 1930 and the address is AI Scheme Services, PO Box 260, Wymondham, NR18 8DU.

If you don’t get a letter, it may be because the bank or card firm that sold you the plan is not part of the scheme, or your plan was part of a packaged bank account or current account rather than being linked to your credit card.

Will this cost me anything? No, it is free.

Why the January 2005 cut-off? That’s when the regulator officially began policing insurance policies.

Will everyone who gets a letter get a payout? Not necessarily. AI Scheme says: “Where we receive a completed claim form, we will write to tell customers whether they are entitled to compensation … If you are not entitled to compensation you will receive a letter explaining this to you.”

If your claim is rejected, you can complain. The scheme will “consider” this and try to reach an agreement within 30 days. If it can’t be resolved, an independent solicitor will review your complaint. If that doesn’t work, go to the Financial Ombudsman Service.

Anything else I should know? If you make a claim, your card protection plan (if it is still running) will be cancelled – even if your claim is rejected. The FCA says: “Existing customers who value the card security product and find its features useful should think carefully about whether they want to keep the product before they make a claim.”

Is this anything to do with Card Protection Plan? No. There was a similar scheme operating last year for those mis-sold CPP card or identity theft protection insurance. It’s also nothing to do with payment protection insurance.