Commonwealth Bank last week admitted selling insurance to customers who were not eligible to make claims, and law firm Slater and Gordon is now investigating potential class actions on behalf of short-changed consumers. Slater and Gordon class actions senior associate Andrew Paull said consumer credit insurance — which is often sold alongside financial products to provide coverage if a person is unable to meet repayments — is “notorious for being unsuitable and consistently poor value”.
“We have found substantial evidence to suggest that a large number of Australian credit card holders are paying hundreds, if not thousands, of dollars a year for essentially worthless insurance,” Mr Paull said on Monday.
“Many policyholders are ineligible to claim some or all of the available benefits, and others are either completely unaware they have the insurance or incorrectly believe it is a requirement for obtaining a credit card.” CBA last week said it was refunding $16 million to about 140,000 credit card and loan insurance customers after finding more people were sold policies they would not be able to claim on.
Australia’s biggest bank said it would also stop selling its Credit Card Plus and Personal Loan Protection products and contact customers whose employment status at the time they bought their policies may have made them ineligible for payouts.
The refund came on top of $10 million it last year agreed to pay back after the same credit card insurance was sold to 65,000 students and unemployed people who were ineligible to claim on it.
“The banks should know when this insurance is likely to be of no or limited value to their customers, however the evidence suggests that they have continued to push these products widely and have collected millions in premiums while doing so,” Mr Paull said.
Prime Minister Malcolm Turnbull has called for a royal commission into misconduct by the financial industry, after the big four banks wrote a letter requesting the commission.