In 2008, Barclaycard purchase Goldfish from Discover Financial Services. The purchase cost the company $70 million and added another 1.7 million customers to its already extensive portfolio. Barclaycard is the UK’s oldest and largest credit card company with 1 in 5 UK credit cards being provided by the lender. Despite its size, or maybe because of it, Barclaycard has suffered significant losses as a result of the two major credit card scandals of the past decade.
In 2006 investigations by The Citizens Advice Bureau, Office of Fair Trading and The Financial Services Authority highlighted real issues with Credit Card Payment Protection Insurance (PPI). The investigations revealed that the cover had been extensively mis-sold to customers and had a shockingly low payout rate for customer claims.
PPI is usually applied to credit cards, such as Goldfish, on a monthly basis and is calculated dependant on the customer’s outstanding balance. Credit card PPI costs approximately 79p per £100 outstanding on the balance. This means on a balance of £3,000 you may expect to pay in the region of £23.70 per month or £284.40 per year. The cost of PPI could increase or decrease each month, though, depending on your outstanding balance.
In 2008 The Competition Commission examined the payout rates for a variety of different insurances. The investigation revealed that credit card Payment Protection Insurance has the worst rate of payout for customers at just 11%. This means that almost as little as one in ten customers who have a Goldfish Credit Card PPI policy may successfully be able to use their policy.
The reason for the low payout rate is not clear. Most lenders do not disclose the reasons why they reject customers’ claims for financial help. When we examine the reasons people chose to complain about Credit Card PPI; however, the situation becomes clearer.
Goldfish PPI policies, as with most types of Payment Protection Insurances, have a high number of exemptions. Exemptions are the circumstances that your insurance will not cover. Some good examples of exemptions include: pre-existing medical conditions and common ailments such as stress, depression and back pain.
In addition to the exemptions many people have claims rejected because something about their personal circumstances makes them ineligible for cover. A good example of this is customers over the age of 65 who are not normally covered because they are perceived to be a higher risk by insurers. For most people who have a claim against their policy turned down the usual response is to ask the question why they were sold the payment protection policy in the first place if they could not use it. The answer is simple – the policy was mis-sold.
Unfortunately, because of a lack of staff training and a lack of eternal processes many thousands of PPI policies have been mis-sold. In some cases the reason is obvious – as above the cover was sold to someone who was ineligible to use it – in other cases the mis-selling can be less obvious or more complex.
A particular problem with Credit Card PPI is that many people often don’t realise they have it. Because of the significant profits to be made from the cover many lenders hide payment protection in the small print meaning customers would have to tick a box to ‘opt out’ of taking the cover.
In more general terms, your PPI may also be considered to be mis-sold if your lender didn’t fully explain the cover to you or the costs involved or you were given incorrect information, for example that taking out the PPI would guarantee you would be approved for the credit card.
Another, more worrying, side of mis-selling concerns customers being pressured into taking out the cover. In 2008 Alliance and Leicester was heavily fined for coaching staff to try and pursue customers to take out the cover after they had stated they didn’t feel they wanted or needed it.
In the same year as the PPI investigations another scandal emerged concerning the credit card industry when The Office of Fair Trading investigated the charges applied to customers’ credit card accounts. The OFT’s investigation revealed customers were often being charged unfair fees for making late payments or exceeding their agreed limit. The charges were, in some cases, as high as £35 and The OFT found this to be excessive. As a consequence of their review you may now be able to claim back unfair credit card charges from your provider.
If you would like to make a PPI claim or you are interested in claiming back bank charges call our team on 0207 471 2000.