An insurance advertised as improving safety for online purchases creates an expectation that the insured can make purchases with increased peace of mind. In reality, the insurance product in question provides only marginal added value over the rights guaranteed to all consumers by the Consumer Protection Act.
Nordea Bank offered an Internet purchase insurance for its credit card customers. The insurance was advertised as giving added security for online purchases. The insurance would compensate for defects in items worth at least 40 euros or damages resulting from delayed delivery. It would also compensate for the cost of repairing the item or for the purchase price where repair costs would exceed the price or if repairs were not feasible.
The problem with the Internet purchase insurance is that, in practice, it does not give the policyholder any real benefit which he would not already have on the basis of the Consumer Protection Act. A consumer is always entitled to demand that a seller rectifies defects – whether he has an Internet purchase insurance or not.
The terms of the Internet purchase insurance also included provisions, which actually reduced the consumer's rights as specified in the Consumer Protection Act. The terms of the insurance, for instance, set a maximum annual compensation amount of 3000 euros.
The Consumer Agency notified Nordea that their claims of additional security provided by the Internet purchase insurance, as well as the name of the product itself, were misleading. The Agency asked Nordea to discontinue using the words ”safe purchases” in the name of the insurance product along with any other expressions which could make the customer think that they are receiving an added benefit over their statutory protection. The bank was also told to refrain from using expressions such as ”added protection” in their marketing.
Lenders may not avoid their obligations
The terms of the Internet purchase insurance also blurred the creditor's statutory obligations. The terms stated that the consumer would not receive compensation unless he had, at first, contacted the seller in writing requesting that the defect be rectified or the damage compensated for.
In reality, a customer who is entitled to refrain from making payment or has the right to a refund, compensation for damages or other payment from the seller can, in addition to contacting the seller, direct his demands to the creditor who financed the sale. The Consumer Agency informed Nordea that, going forward, it must also disclose its own liability for defects and delays in online transactions.
Genuine benefits to those paying by debit card
An Internet purchase insurance provides genuine security only when purchases are paid for by a Visa Debit card. As purchases made by a debit card are not made on credit, cardholders may not turn to the creditor when problems arise. What the consumer can do, however, is to appeal to the insurer in addition to their statutory protection.
Nordea responded by stating that in the future it will pay more attention to how it communicates the features of its insurance products and the security benefits they have. However, even after being reprimanded, the bank continued to market the Internet purchase insurance by using the exact same expressions as before. When queried on the matter by the Consumer Agency, the bank responded by saying that they will continue to offer the insurance as an added feature of their card products, but it will no longer be marketed. KUV/10899/41/2008