The latest mis-selling scandal amounts to banks and card companies offering a service (and getting money) but giving little or nothing in return.
People were offered "identity theft insurance" when buying financial products - and nobody bothered to tell them that if you are a victim of such fraud, often the bank or card firm is itself liable for any loses anyway - not you.
The products offered by banks and card issuers were often sold when customers called to register or activate a debit or credit card.
The Financial Ombudsman says:
While card protection insurance can be useful for some people, in many of the cases we see the consumer neither wanted nor required the cover.
There are a number of provisions in place that provide you with some protection if your identity is stolen – so don’t feel pressured into taking out an insurance policy on the spur of the moment.
Seven million customers bought and renewed 23 million policies. They will soon receive a letter providing more information on the compensation process.
The redress bill could be up to £1.3bn, with redress per customer depending on the type of policy (or policies) owned and the length of time it was held.
Here are the main firms who will now be involved in paying out compensation:
- Bank of Scotland
- Canada Square Operations Limited (formerly Egg Banking)
- Capital One
- Home Retail Group Insurance Services Limited
- MBNA Limited
- Morgan Stanley
- Royal Bank of Scotland
- Tesco Personal Finance
So what do you do if you are one of those who bought this product?
You do not have to do anything. CPP, the company behind this insurance product, will write to affected policy holders to explain how the compensation scheme will work and what you have to do next.
And before the compensation-chasing unsolicited texts, calls and emails start arriving, remember you will not have to use and pay a company to claim compensation on your behalf.
If you were told you would be liable for costs if money was taken from your account, or the risks of having your ID stolen were exaggerated, you could have been a mis-selling victim.
If this applies to you, you should write to the insurer. If they do not reply within eight weeks, you should contact the Financial Ombudsman Service (0800 023 456.)