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LONDON, Jan 27 (Reuters) - Around two million Britons whomay have been mis-sold insurance to cover events such as creditcard fraud will be asked to vote for a scheme that could costtop high street banks hundreds of millions of pounds incompensation.
The scheme, which affects security products on credit anddebit cards over an eight-year period, comes after banks havealready set aside more than 24 billion pounds ($36 billion) tocompensate customers mis-sold loan and mortgage insurance.
The Financial Conduct Authority (FCA) said on Tuesday 11lenders and card issuers had voluntarily agreed to compensatecustomers after "collaborative discussions". They includeBarclays, HSBC, Lloyds, RBS and Affinion, a company which aims to improve customer loyalty.
The total amount of compensation will depend on how manyeligible customers pursue a claim after buying or renewingproducts such as Sentinel, Safe and Secure Plus and CardProtection between Jan. 14, 2005 and August 2013.
The average annual cost of such products, whose featuresincluded insurance to cover fraudulent use if a card was lost orstolen, was 25 pounds ($38). This could put the finalcompensation bill at around 400 million pounds.
Cover for fraudulent use, however, is unnecessary becausecard issuers are typically responsible for transactions aftercards are reported lost or stolen. Before such a report,customers are only liable for unauthorised purchases in limitedcircumstances, the FCA noted.
Eligible customers will be contacted by May and asked tovote in favour of the scheme, which will also have to beformally approved by the High Court. If enough customers votefor it, compensation could be paid later this year.
The scheme is similar to a deal in which around 2.4 millioncustomers were able to claim 450 million pounds after being soldunnecessary card or identity protection through a company calledCPP last year, without the FCA resorting to enforcement action.
However, some consumer groups have said that scheme was afailure because the redress door was slammed shut too early.
Tracey McDermott, the FCA's new supervision head, said theindustry's willingness to voluntarily try and resolve historicproblems was a step towards helping restore trust in financialservices.
($1 = 0.6630 pounds) (Reporting by Kirstin Ridley; Editing by Jon Boyle)
