Up to €30m to be paid over mis-selling of card protection

Not so long ago, consumers across the State were getting payouts of several hundred euro for having been incorrectly sold payment protection insurance. Now credit card holders may be the next in line for compensation, if they can show that they were incorrectly sold a product that offered them little more protection than what they already had.

It's understood some 160,000 people could be in line for a claim of between €100 and €200 each for having been mis-sold a credit card protection policy.

The institutions involved – Bank of Ireland, MBNA and Ulster Bank – could be stuck with a payout of between €15 and €30 million. However, the bill is likely to be considerably less than this, given that in a similar redress scheme in the UK, only 33 per cent of those who were entitled to make a claim did so.

But could you be one of those due a refund?

What is it?

An optional policy, card protection (CP) offers cover to policyholders in the event of credit card loss or fraud. This means that, when taking out a credit card, you may have been offered the option of buying insurance on that card, which would protect you against its unauthorised use.

Such policies first came on the Irish market during the 1990s via Homecare Insurance Ltd, a subsidiary of the CPP group.

These policies offered protection for unauthorised transactions on your card – Ulster Bank for example typically offered up to €170,000 – while other features included covering the cost of replacement locks and keys if house keys are lost or stolen up to €250; the facility to cancel lost or stolen cards and order replacements in one phone call; and the replacement of a lost handbag or wallet up to €200 (excess €45).

However, it has since come to light that such protection may have been mis-sold, as those who purchased it may not have been aware, for example, that the credit card provider is responsible for any transactions after you inform them that your card has been lost or stolen. Not only that, but even if fraudulent transactions happen before you realise the card has been taken, Ulster Bank customers for example, are only liable for the first €30 put on the card.

The Central Bank launched an investigation into the sale of the product, and concluded that "the product included a small element of cover that customers did not need and could not claim on" and has instituted a redress scheme that will offer customers the choice of making a claim for the amount of policy premium paid since August 1st, 2006, the date the consumer protection code came into force.

UK experience

In January 2014, a redress scheme was set up in the UK to refund anyone who bought a card protection or ID fraud protection policy from CPP. Some 23 million such policies were bought and renewed, and the financial conduct authority (FCA) found “widespread mis-selling” of these policies. As a result, it fined CPP £10.5 million (€13 million) in November 2012.

A redress scheme, involving CPP and 13 banks and credit card companies, including Bank of Scotland, Barclays Bank, HSBC, Tesco Personal Finance and MBNA, was then set up, and began in January 2014.

Former Bank of Scotland customers in Ireland may have already claimed a refund of their premiums via this scheme.

However, an issue from the UK experience was that, on receiving a letter outlining an individual’s right to a claim, many people dismissed them, fearing they were part of a scam. So, many people missed the original deadline of August 30th, 2014.

While a further exceptional deadline was then given – February 28th, 2015 – this has now closed, and in a statement issued at the end of March, the FCA said that “no scheme complaints about claims forms received after February 28th, 2015, (the exceptional bar date) will be considered by the scheme administrators”.

So while the administrators paid some £451 million in compensation to 2.37 million claimants, or an average of £190 per claim, by March 5th, 2015, the response rate was just 33.9 per cent of all potential claims.

According to the FCA, just one claim received before the original August 30th deadline was rejected, although 11,045 were rejected after this date.

Who can claim?

At present, customers who purchased such insurance from Bank of Ireland, MBNA and Ulster Bank may be eligible for a claim. The claim is related to the period from August 1st, 2006, and the refund programme began on March 30th, 2015.

How much can I claim?

The Central Bank has requested those who sold the product to give a refund of premiums, plus compensatory interest, less any amounts paid out in respect of a claim on the policy.

Given that the average annual premium was about €30 a year (€2.50 a month), you could be in line for a payout of up to about €200.

Interest will also apply on this amount, but this is not likely to be material.

Bank of Ireland, for example, says that fair value must be applied when calculating refunds.

“Fair value interest is the interest the refund amount would have made from the original date to the refund date,” the bank states.

What do I have to do?

Credit card providers who offered the product are currently in the process of sending out letters to customers letting them know about their opportunity to claim.

Ulster Bank says its customers will be sent a letter and claim form by May 15th, which must then be completed, signed and returned within 90 days to qualify for a claim.

The bank says that, once it receives your claim, it will respond to you within 40 business days.

Bank of Ireland says its letters started issuing on March 30th and customers will receive these letters up to April 30th. Customers will need to respond by July 24th, 2015, in order to qualify.

Can I keep my protection?

If you still believe that this product is of use to you, you can keep your policy by paying your premiums and ignoring any claim letters you may receive.

Can I get a company to claim it for me?

Following the PPI mis-selling scandal, many third parties emerged offering to collect compensation on behalf of individuals. However, it’s unlikely that this is necessary for card protection claims, given its apparent simplicity. Ulster Bank for example, says that it is dealing directly with customers in relation to claims.

Why might I not be able to claim?

In certain circumstances, you might find that you won’t be eligible for a claim. For example, if you bought the card protection before August 1st, 2006, but paid no premiums thereafter, or purchased the policy with Bank of Ireland after August 1st, 2011, you may not be eligible for a refund.

In addition, if you claimed on the policy, and received payment that was greater than the premiums paid, or if you have already received a full refund, you will not be eligible for a refund.

If you don't receive a letter but believe you are eligible for a claim, you can contact the relevant institution. Bank of Ireland says if you don't get a letter by May 15th you can download one from its website. Contact details: How to get in touch If you think that you might have a claim but would like to learn more, you can contact the various institutions involved at the numbers below.

MBNA

0719 656 611

Overseas: +353 719 656 611

Bank of Ireland

1890 946 160

Overseas: +353 76 6248023

Ulster Bank

Telephone: 1800 283 062.

Overseas: +44 2890 538721

Contact details How to get in touch