Banks and credit card providers agree card security product mis-selling compensation

Affected policyholders will receive a letter from a consumer redress scheme set up by product provider Affinion International and a number of high street banks and credit card providers that sold the policies to their customers, the FCA said. The FCA has not conducted a formal investigation into sales of Affinion card protection products, but said that many of the policies sold had been "unnecessary".

Around two million customers that purchased an affected product since 14 January 2005 would receive a letter and compensation claim form from 'AI Scheme Limited' between mid-August and mid-September, the FCA said. The letter would provide them with details of how to claim, it said.

Affinion's card security products were sold under the names Card Protection, Sentinel, Sentinel Gold, Sentinel Protection, Sentinel Excel and Safe and Secure Plus, the FCA said. These products typically cost around £25 a year, but the amount of compensation paid to each consumer would depend on the length of time that they had the product, the FCA said.

The Affinion redress scheme will close on 18 March 2016, it said.

The new scheme is similar to one agreed between the then Financial Services Authority (FSA) and 13 high street banks over sales of Card Protection Plan (CPP) insurance policies in 2013. CPP was also fined £10.5 million by the regulator for giving "misleading and unclear information" to consumers at the point of purchase.

The affected products offered insurance to consumers to cover fraudulent use of a card that had been lost or stolen. However, card issuers are typically responsible for any fraudulent transactions that take place after a card is reported as lost or stolen, and will usually cover their customers for anything over the first £50 if transactions took place before the card was reported missing.

The FCA said that the scheme had also been designed to deal with "any other concerns" that policyholders had over the way in which the product was sold to them. Those that decided to claim under the redress scheme would have the product cancelled, even if the claim was ultimately unsuccessful, it said.

The card providers that have voluntarily agreed to be part of the AI Scheme and to fund compensation payments are AIB, Barclays, Capital One, Clydesdale Bank, HSBC, Lloyds, Northern Bank trading as Danske Bank, Santander, Tesco Personal Finance, the Co-operative bank and Royal Bank of Scotland, according to the announcement.