Ireland is at the tip of a new mis-selling iceberg

Illustration by Tom Halliday

Louise McBride

The next mis-selling scandal is unfolding. Over the last few weeks, Card Protection Plan (CPP), the British insurer fined €13m almost two years ago for mis-selling insurance in Britain, started to write to Irish people who may also have been mis-sold useless credit card insurance.

About 20,000 Irish people will get letters from CPP and many will be entitled to compensation. Many of these people still have - and continue to pay for - the insurance.

The insurance in question is card protection and identity protection insurance. This insurance was sold as a way for consumers to protect themselves against fraudulent transactions on their credit cards if their cards were lost or stolen. However, the insurance is useless because customers are not liable for any unauthorised payments on their cards - instead, banks automatically refund any money that is fraudulently taken.

In a recent investigation, the British financial regulator uncovered widespread mis-selling of these products by CPP in Britain between 2005 and 2011 - hence the €13m fine back in November 2012. The British regulator also reached a deal with CPP and 13 high street banks and credit card issuers about a year ago, where they agreed to pay customers up to €1.6bn as compensation for the mis-selling.

In a letter sent to an Irish customer, which was seen by the Sunday Independent, CPP writes: "You have or have had a card protection policy which you purchased through Homecare Insurance [part of CPP]. We provided misleading information when we sold your policy to you. We have agreed with the relevant financial regulator(s) to write to you as you may be entitled to compensation. You may be entitled to compensation if you were given misleading or unclear information when you were sold your card protection policy - and you purchased the policy based on that information."

The customer who received this letter bought CPP's card protection insurance when he applied for a credit card at Bank of Ireland.

"The policy said it covered you for up to €170,000 worth of unauthorised transactions that occur after you inform your bank or card issuer that a card was lost or stolen," stated the letter. "But you did not need this cover, as your bank or card issuer is responsible for any transactions after you tell it your card has been lost or stolen. The policy said it covered you for up to €8,500 worth of unauthorised transactions that occur before you inform your bank or card issuer that a card was lost or stolen. But we did not explain that you are only liable for unauthorised transactions in limited circumstances as your bank or card issuer will usually cover you for anything over the first €75 of those transactions."

It typically cost about €45 a year to buy a card protection policy - or €59 a year to buy identity protection, according to a spokeswoman for CPP.

Remember, if you bought this insurance, you are likely to have done so through an Irish bank or credit card issuer - even if the product itself was CPP's or that of another insurer.

For example, Bank of Ireland had "an agreement to introduce customers to Homecare Insurance - who provided the product in Ireland," according to a spokeswoman for the bank. "Customers could indicate that they wished to purchase a card protection policy from Homecare by ticking a box on their Bank of Ireland credit card application form. They were then contacted by Homecare Insurance/CPP. There was no outbound selling of this product by Bank of Ireland. The bank ceased introducing customers to Homecare Insurance in 2012."

The letters being sent out by CPP relate to policies sold from January 2005 - because this is as far back as CPP says its customers are entitled to claim compensation for. So if you are still paying for a CPP policy, which you bought in 2005 (or earlier), you could be entitled to up to €590 in compensation - or more, depending on what you paid for your policy.

You could, of course, have signed up to and paid for a policy long before 2005 - but it seems unlikely that you will be able to claim compensation for the cost of any premiums paid before then. "If you are entitled to compensation, we will return the amount you have paid for your policy since January 14, 2005, less any sums paid out in respect of the policy, plus interest on the amount owed," stated CPP in the letter.

A spokeswoman for CPP said that any customer, who would like to make a complaint about policies sold before January 2005 or who wish to cancel their policy, "will be managed through the standard complaints and cancellation handling process". "Our priority is to achieve the best outcome for customers affected by historical issues related to historical sales made within the Republic of Ireland," said the spokeswoman.

It is worthwhile contacting CPP if you have moved address since you bought card protection or identity protection from the insurer. You're unlikely to get the insurer's letters if you never notified CPP that you changed address. You may even have forgotten that you bought the insurance from CPP. Check your bank and credit card statements to see if you are still paying for - or have in the past paid for - a card protection or identity protection plan. If you're still paying for the insurance, cancel it - it is a waste of your money.

CPP is unlikely to be the only one in the frame for the mis-selling of useless credit card insurance in Ireland. Seven million people were mis-sold card protection and identity protection insurance in Britain - and banking experts believe the products were widely sold in Ireland.

Not all banks and credit card issuers sold credit card protection insurance. For example, "Permanent TSB never sold this type of insurance to credit card customers", said a spokeswoman for the bank.

The Central Bank is reviewing how credit card insurance was sold in Ireland "by a number of providers", according to a spokeswoman for the Central Bank. "This review is particularly in relation to whether firms were selling insurance which provided cover to consumers - part of which they were entitled to anyway under law and/or under their contracts," said the spokeswoman. "The review is ongoing and our priority will to contact and provide redress to consumers who have been sold cover which was not required."

It's more than a year since the Central Bank started to probe the sale of this useless credit card insurance in Ireland. What's taking so long?