Banks to pay back 2m customers conned by useless card insurance

AROUND two million people duped into buying worthless insurance by their bank are in line for up to £270 compensation each.

Britain’s biggest lenders routinely sold insurance that was designed to protect customers against fraudulent transactions made on their cards.

But the insurance – which typically cost £25 a year – was useless as banks are legally obliged to refund those fraudulent payments anyway.

City watchdog the Financial Conduct Authority said customers would start receiving claims forms later this month with the first pay-outs made in late September.

They could receive as much as £270 but will have to claim before March 18 next year or miss out.

Campaigners criti ci sed the deadline and said customers have not been given long enough.

eleven banks and financial companies were involved in the scam, including Barclays , HSBC, Lloyds, Santander and Royal Bank of Scotland.

Although on a much smaller scale, the case has echoes of the payment protection insurance scandal that has lumbered the UK’s biggest banks with a compensation bill of almost £27billion.

In this case they sold a variety of ‘card security’ products provided by a little - known firm called Affinion, based in the US.

Customers were typically sold these products – given names such as Sentinel, Card Protection and Safe and Secure Plus – when they applied for a new card, with the bank receiving cash for each policy sold. The banks and Affinion have set up a company called A1 Scheme to pay compensation. It will cover policies since January 2005, which means someone who has paid £25 a year for the last decade could be owed £250 – rising to £270 with interest.

Banks have already been caught out in an almost identical scam, involving similar products sold by a firm based in york called CPP.

More than £450million in compen- sation was paid to 2.4million customers but nearly five million others missed a deadline to claim and campaigners are urging people not to miss out again.

Guy Anker of MoneySavingexpert.com warned customers not to mistake the A1 Scheme letters for junk mail and lodge the claims as quickly as possible.

‘If you’re one of the two million who were flogged this often worthless insurance you should get your claim in, it could net you £200 plus,’ he said, adding that under the previous scheme numerous people thought the letters were PPI junk mail and ‘chucked them away’.

He said that only a third who were due money claimed it. Tory MP Alok Sharma was ‘incredibly surprised and disappointed’ by the deadline. ‘It simply is not good enough that those affected only have a matter of months to make a claim,’ he said.