As I recall at the time, we used the debit card only to subscribe to Xbox live, though could be wrong. I know since bought no paid games as such were directly bought from the card via the Xbox itself. I guess I'll have to find the original t&c's on the Xbox to see exactly what it says we signed up for and agreed to.
So I see that there is a category which is called "items requiring more information" and that category includes car parts.
Presumably when you bought the insurance you provided more information? Or you gave some description? Or are you assuming that your consignment was in the "no protection category"
someone signed up to to MS/xbox live using that debit card, when they did, they agreed to it's continued use.
same as say using one to pay paypal on ebay purchases, within their T&C's they state it sets up a CPA.
I would also suggest that as the instances of such complaints to xbox live dropped of the radar dramatically sometime back, their T&C's must have changed to clearly stating there is a pin to prevent such in game purchases.
you need to carefully look at when the card was 1st used with microsoft and for what purpose and what it actually signed the cardholder upto.