Credit Card refund rules
Under Section 75 of the Consumer Credit Act 1974, all credit cards must protect any purchases made over £100 and under £30,000. These protections and credit card refund rules aren’t mandatory, for debit cards, so buying with a credit card can be a good idea at times. Note, credit card protections under the law are different from those given to charge cards.
When looking to receive chargeback claimed under Section 75 for a credit card, you have 120 days to make a claim. As this is a legal measure, not a company policy, this affects all credit cards, including American Express.
But what happens when you need protection on the card itself?
Sometimes, just protecting your purchases with the protections afforded by a credit card isn’t enough. Having a way of protecting your money before it is spent is also necessary to prevent fraud, unauthorised use of the card, and identity theft.
Any insurance or protection that covers this is called a Credit Card Protection Plan, or a Card Protection Product, and these can cover a wide range of problems that people can have with their credit cards.
While these can be good value for money for those, who are more liable to lose their cards, for many it was sadly mis-sold to them.
Customers are offered further protections over the lost or stolen card replacement, such as being able to withdraw cash with a passcode at certain ATMs if their card is lost and insurance against unauthorised uses of the card.
Which banks sold Credit Card Protection Plans?
Generally speaking, banks never have sold their plans. But, some banks and credit card providers have worked in the past with companies such as CPP, who do sell these products. While they did not directly take customers money, they took money from CPP and other companies to put customers in contact with them, and are partly responsible for the widespread problems caused.
The banks, retailers, credit card supplier and building societies which were involved with CPP and the associated scandal are, according to the FCA:
Barclays, Bank of Scotland, Egg, Capital One, Clydesdale Bank, Home Retail Group Insurance Services, including Argos,
HSBC, MBNA, Morgan Stanley, Nationwide, Santander UK, RBS, Tesco, Personal Finance
Mis-Sold Credit Card Protection Plans
Mis-selling of these policies was common before 2011, and many consumers still don’t realise that they might be owed hundreds of pounds in compensation if they were mis-sold their protection plan.
Many different credit card providers and insurance companies offered protection plans with their cards, both directly and via agencies. While for many, the plans were sold legitimately, there are also many people who were wrongly sold their plans. These people deserve compensation for the cash they handed over for policies they didn’t want, need, ask for. Mis-selling of these plans also can occur when the small print was not adequately described.
CPP, known to many as Card Protection Plan, is a company which was at the centre of the mis-selling scandal. They arranged agreements with many lenders, banks, building societies and other credit card providers that they would get the opportunity to sell to their customers.
When customers were told to call a number to activate their card, the line was redirected to the CPP phone line, where pushy sales people used manipulative tactics to convince customers that they needed to sign up with the service to guarantee the safety of their credit cards. Many customers thought they were talking to their bank, card supplier or a financial advisor, and not a salesperson for CPP.
By not explaining the risks of identity theft and unauthorised card uses correctly, they were able to exploit people’s fear of risk and convince them that their card protection insurance policies were in effect, necessary purchases.
Mis-selling can also occur when you were misguided in any way by the insurance policy. By them overstating the risks of not having insurance and understating the costs of having a policy, they made the card protection policies seem much more cost effective than perhaps they were.
The fact that CPP and many other companies were so heavily involved in the fraudulent mis-selling is why they were required to adhere to a compensation scheme. These schemes they now implement make it possible to retrieve cash that was wrongly taken from you through mis-selling.
One of the big issues with the mis-selling was that the insurance and card protection providers didn’t explain that banks also must cover fraud protection.
Banks, like the protection companies, cover damages from fraud and protect customers against it unless they can prove a customer was grossly negligent. In the case of gross negligence, then this voids both the bank’s policies and the policy of the insurance firm, making this aspect of the policy pointless.
CPP is by no means the only company to have had these practices in place. There were other insurance and protection companies which also wrongly sold their customers card protection schemes. Some were inadequate for the job, not as described, forcefully sold or just unnecessary.
Many other sales teams overstated risks of identity theft and credit card fraud and exaggerated the extent to which these would be lessened with an insurance policy.
Oftentimes, customers were told they would be able to cancel their policy if they later on decided that the policy was not right for them or that they were given misleading or unclear information which led them to believe that the policy was different in nature than it was, or that it was more necessary than it otherwise might be.
Lastly, if sales staff sold the card protection product to a customer that has already informed them that they do not want to buy it, there is also a case for a claim to be made and compensation to be won.
The CPP (Card Protection Product) Scheme
The CPP compensation scheme was set up in early 2014 and permitted anyone who was mis-sold credit card protection plans to reclaim their funds. CPP was told that they must refinance the funds back to anyone who bought certain products from them between 2005 and 2011, and to others who were outside of that range and could prove that they were wrongly sold to and needed to be compensated for their financial losses.
This was set up in agreement with both the Financial Conduct Authority, FCA, and the Financial Ombudsman Service, the FOS. This was a new type of consumer protection, which offered protection against companies which took advantage of you while offering protection themselves.
There are many customers of CPP who do not know, realise or understand that they have a policy with CPP, and not someone else. Because many people knew that they had phoned a number given to them and at the direction of their bank, lender or credit card provider, they assumed that it was the same company which was on the phone to them regarding their protection policy. As we now know, this was not the case for a lot of people. Not only did this lead to people being duped out of their heard-earnt cash, but they also were then less likely to claim their funds back once the CPP scandal was publicised as they didn’t know they had a policy with CPP.
CPP, also known to many as Card Protection Plan, agreed to offer full compensation to anyone who applied correctly. This compensation was to include the amount that they had paid in, minus any payments awarded to them due to the policy. There is also an 8% interest rate on the policy refunds, meaning that anything you paid in is now being refunded to you at a greater value to keep up with inflation.
What to do if you bought a Credit Card Protection Plan before 2005
If you purchased a credit card protection plan or policy before 2005, then it is a little bit more difficult for you to apply for a refund. Speaking to a claims management company will help you in deciding the best course of action for you.
Usually, the best course of action will be working with the claims management team to put together a full letter and complain which details the law and why you are entitled to a refund. The claims team will know how best to deal with the complaint, as every case is different.
In the cases where the bank, building society or card provider are unable to help, are refusing to help, or seem to be making the process unnecessarily complicated, then there are other options which your claims management team will discuss with you. If the bank takes over eight weeks to get
back to you and fully resolve the issue, then it can, for most people, involve the government’s Financial Ombudsman Service, the FOS.
The FOS will work with your team to get the best results they can. If they side with the letter you send them, then the company will be forced to pay up and give you the compensation that you deserve. If you don’t agree with their findings, then you can pursue your money by taking CPP or another provider of card protection to court.
How much does the CPP owe me?
The CPP and other companies owe customers different amounts. This varies with many factors, but mostly how much you paid for your policy when you had your policy, and how long you had it for. Once all of this is taken into consideration, the protection company will contact you with a letter stating how much they owe you.
The average person who had the policy for around five years would receive just under £200 in compensation from such companies. You are allowed to accept this compensation or decline it if you don’t think it is accurate.
If you believe that you are owed more than the company is offering you, it is always worth taking it further. Your cash can sometimes be held up in accounting errors, but it is also sometimes due to a company deliberately trying to rip you off. Your best bet can be to speak to a claims company, who will assess the situation and fight your corner to get you the compensation you deserve for the mis-sold credit card protection plans.