Millions of bank customers who were missold credit card security products could be in line for compensation after the FCA reached a voluntary agreement with 11 high street banks and insurance provider Affinion.
The regulator says around two million customers will receive a letter from the compensation scheme, called ‘AI Scheme Ltd’, giving information about making a claim against their bank.
The scheme must now be voted on by eligible customers and formally approved by the High Court before compensation can be paid.
FCA director of supervision and authorisations Tracey McDermott says: “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.
“I would encourage anyone who receives a letter from ‘AI Scheme Limited’ in April or May 2015 to vote for the scheme. The scheme will provide access to a dedicated helpline and a website, which customers should use if they have questions or need assistance.”
The FCA says customers were sold credit card security products to cover fraudulent use of a card if it was lost or stolen. It says this was unnecessary, however, because the card issuer would typically be responsible for any transactions after the cards were reported as being lost or stolen
It is not yet clear how much compensation the banks could have to pay out in total, although the average cost of the card security product was £25 per year.
The banks participating in the scheme are:
- AIB Group (UK) Plc trading as First Trust Bank in Northern Ireland and Allied Irish Bank (GB) in Great Britain
- Barclays Bank Plc
- Capital One (Europe) Plc
- Clydesdale Bank PLC
- HSBC Bank Plc
- Lloyds Bank Plc
- Northern Bank Limited trading as Danske Bank
- Santander UK Plc
- Tesco Personal Finance plc
- The Co-operative Bank Plc
- The Royal Bank of Scotland Plc