Thousands of motorists have been paying twice for their breakdown cover for as long as 16 years, it has emerged.
The AA and RAC customers affected will receive refunds of up to £2,000 each under compensation plans.
The companies have set aside up to £15 million after realising some customers had two policies at the same time.
These customers had bought annual breakdown cover directly from the motor firms while also paying for a second policy as part of a packaged current account with Lloyds Bank or TSB.
The AA and RAC have set aside up to £15m after realising some customers had bought annual breakdown cover directly while also paying for a second policy as part of a current account
These paid-for accounts included breakdown cover as a perk.
Around 17,000 AA customers have been hit, along with an unconfirmed number of RAC customers thought to be near 8,000.
One customer is in line for a £2,000 refund after the AA contacted her to say she had been paying twice for the same cover for 16 years.
‘They asked me if I knew I also had a concurrent membership with Lloyds and I didn’t,’ says Nicole, of South Yorkshire.
‘Our account with Lloyds means we were given membership with the AA which covered all sorts of things we are paying for in our gold membership,’ she told Radio 4’s You And Yours programme.
Nicole was later told she would be reimbursed for the cost of her AA membership since 2001, plus 8 pc interest, which will be around £2,000 in total.
The news will reignite fears that many customers are paying for expensive packaged bank accounts with add-ons such as breakdown cover, phone and travel insurance which they either don’t need or don’t even realise they have.
The Financial Ombudsman, which settles disputes between customers and banks, receives more than 3,600 complaints about packaged accounts every month and finds in customers’ favour in a quarter of cases.
Packaged accounts are the second complained about issue after payment protection insurance.
The AA says it became aware of the scale of the problem when it updated its IT systems last year and was able to identify those who were unwittingly paying twice for the same product.
Members could have been paying double for breakdown cover since 2001, when Lloyds Bank first started offering AA services as part of its packaged bank accounts.
Most packaged current accounts at other banks also include breakdown cover, raising the prospect of other customers paying twice without realising.
The AA is halfway through contacting 17,000 customers who ended up with duplicate cover.
It started contacting people six months ago via letters and text messages. It has put aside £10 million to refund customers.
The RAC refused to admit how many of its customers are affected, saying it is a ‘small number’, but has set aside £5 million as part of its ‘correction programme’.
To be refunded for backdated duplicate payments, you must cancel your breakdown membership.
If you instead cancel your packaged account, Lloyds and TSB will not refund you. Call the AA on 0800 048 0261 and the RAC on 0330 159 0740 for more information.
Edmund King, president of the AA, says: ‘We became aware of the extent of it probably last year when we invested £100 million in better IT systems.
The AA says it became aware of the scale of the problem when it updated its IT systems last year and was able to identify those who were unwittingly paying twice for the same product
We realised quite a few people did actually have dual cover. We have never gone out there and mis-sold membership.’
He said that when banks first started to offer extra benefits with paid-for accounts, the breakdown cover included was often very basic, so some people still wanted separate AA membership.
But today, the cover included is more comprehensive, so it is unlikely people are willingly paying twice.
He said bank statements for packaged accounts made it ‘pretty clear’ when breakdown cover was included, but that it wanted to alert those who were, nonetheless, unaware of this.
‘It is interesting that quite a few people actually don’t mind having dual cover because there are some extra things you can buy by being an AA gold member,’ he says.
The AA said it was ‘the first to acknowledge this’ and RAC then followed its lead and announced a similar programme.
An RAC spokesman says: ‘We have identified a small number of members who chose to purchase membership directly from us, and also have cover with us via their bank account.
‘We are contacting the relevant members to draw this to their attention and to double-check that their cover is still appropriate to their needs.’
A Lloyds Bank spokesman says: ‘As part of our packaged bank account opening process, we advise all customers to review any existing cover which may be held elsewhere, to ensure they are not paying twice for the same features.’
The bank also writes to its customers each year outlining their account benefits and warning about duplicate cover.