Junk insurance lands Westpac in court
ASIC is taking Westpac to the Federal Court, alleging it sold junk credit insurance to 384 customers that did not want it and whose accounts were unlawfully debited to pay for the premiums.
The corporate regulator has exposed dodgy sales of add-on insurance products promoted with credit cards and lines of credit to customers, under the bank's Credit Card Repayment Protection and Flexi-Loan Repayment Protection policies
Between April 7, 2015, and July 28, 2015, ASIC claims the bank sold the products under false and misleading pretenses, asserting its right to charge consumer credit insurance (CCI) premiums customers were not liable to pay.
"The supply of the CCI and the debiting of amounts for premiums in those circumstances was a failure by Westpac to do all things necessary to ensure that the financial services covered by its AFSL were provided efficiently, honestly and fairly," court documents read.
The action follows ASIC's investigation of 11 major banks and other lenders selling junk insurance.
ASIC deputy chair Karen Chester says the investigations in late 2018 and 2019 found lenders had disappointingly not changed policies and conduct to stem harms from the design and sale of CCI.
"As a result, we've commenced civil proceedings against Westpac," she says.
Financial institutions and lenders have paid about $250 million in remediation to affected consumers, which is a payment of $430 on average to 580,000 consumers.
In addition to Westpac, ASIC announced last year that $160 million of the remediation pool came from NZ, Australian Central Credit Union, Bank of Queensland, Bendigo and Adelaide Bank, Citigroup, Commonwealth Bank, Credit Union Australia, Latitude Finance Australia, NAB and Suncorp.
ASIC's Report 622, Consumer credit insurance: Poor value products and harmful sales practices, published in July 2019, revealed that the design and sale of CCI had consistently failed consumers. ASIC found that CCI was poor value, CCI sales practices and product design caused consumer harm and consumers were being incorrectly charged for CCI.
ASIC is seeking declarations and pecuniary penalties from the Federal Court, which will shortly announce the date for the first case management hearing.
This article first appeared on Financial Standard
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