Regulation could kill off free insurance cover schemes
FSA regulation could sink extended warranty agreements used to promote credit cards and bank accounts, according to Halifax Bank of Scotland (HBOS).
The insurance and banking giant, along with the British Banking Association (BBA), is warning that the cost of ensuring such products are FSA compliant could make them prohibitively expensive.
HBOS Insurance household and travel managing director Simon Stevens said: "It is a shame for the consumer as they will lose out on some of their credit card cover. Income streams will also disappear for the general insurance industry."
Many card companies such as Barclaycard currently give away extended warranty schemes with their cards in order to attract and maintain customer loyalty. Under FSA regulation those companies would offer those schemes through a sales process. This process would add time and expense to products that currently cost the card issuer just a few pence.
Stevens said: "The sale cost of making these policies compliant will mean rates will have to pick up enormously."
HBOS concerns were backed up by the BBA, which confirmed it was consulting members about the issue.
A spokesman for Barclaycard, which offers two free insurance products on its cards, confirmed the company was looking at how it presented these schemes to its customers. But it played down any possibility of the products being priced out of the market.