Card insurance rip-off
Banks may face lawsuit over dud product
THE big banks could face a class action over the sale of millions of dollars of “worthless” credit card insurance.
The Commonwealth Bank has already admitted selling loan and credit card 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 shortchanged 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 – was “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 yesterday.
“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.”
The CBA last week said it was refunding $16 million to about 140,000 personal loan and mortgage insurance customers after finding people were sold policies they would not be able to claim on.
It came on top of the $10 million it last year agreed to pay back after the credit card McGrath Limited chief executive Geoff Lucas says a refocused strategic plan to return the company to growth is being developed insurance was sold to 65,000 students and unemployed people who were ineligible to claim on it.
Australia’s biggest bank also last week said it would stop selling its Credit Card Plus and Personal Loan Protection products and contact customers whose employment status at the time that they bought their policies may have made them ineligible for payouts. “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.
The first public hearing of the royal commission into misconduct in the financial services sector begins in Melbourne today.