Card protection already exists for consumersKey 'benefit' of policies is a legal right

23 September 2011

Are card protection policies worth it?

Consumers already have protection against card mis-use 

Credit and debit card providers are selling card protection policies off the back of a benefit that consumers have as a right.

Which? believes that several leading credit and debit card providers are misleading customers about a key benefit of their card protection policies. We found that many providers focus on the protection of losses caused through the fraudulent use of lost or stolen cards when this is a right all consumers have under the Regulatory Regime for Banking. 

Protection under banking codes

The banking codes entitle anyone who has not acted carelessly or with gross negligence to full redress of losses, bar the first £50 of any loss. In reality, most card providers will waive the £50 excess. However, big hitters such as Barclaycard, the Co-operative Bank and Lloyds TSB are among those that highlight the cover for loss or theft and fraudulent transactions, and cap the level of compensation at either £20,000 or £100,000. 

Potential breach of consumer law

Which? believes that the card providers could be in breach of consumer law. Under the Consumer Protection Regulations, companies, in particular:

  • Cannot omit material information (in this case failing to tell people that they have unlimited protection under the banking codes)
  • Cannot mislead consumers by presenting a right as a benefit.

Consumers who feel that they have been mis-sold card protection policies should complain to their provider. 

Card providers deny any wrongdoing

The providers denied that their policies focus on this 'benefit', pointing out that card protection from loss or theft is just one element of their policies. Barclaycard told us: 'Card protection provides a helpline service which enables customers to cancel all their cards with one call, a range of insurance benefits, as well as emergency assistance when away from home.' 

Lloyds TSB responded: 'Cover for fraudulent use of payment cards is only a very small part of the product and cover is for more than just a customer's credit or debit card.'

What's in a name?

Which? insurance expert Dan Moore said: 'Protection against fraudulent use of a card is one of the key benefits highlighted by policy providers, and besides they are called "card protection polices', so pointing out that there are other benefits, many of which you may have under home or car insurance policies, seems disingenuous.'

Which? has passed its findings on to the Office of Fair Trading for possible further investigation. 

For more information

Which? Best Rate Credit Cards - The best credit cards, as rated by Which?

Which? Best Rate Current Accounts - Who offers the best current accounts?

ID Theft Insurance - Our view on this similarly controversial product