Commonwealth Bank has been ordered by the Australian Securities and Investments Commission (ASIC) to reimburse about AUD10m ($7.87m) to more than 65,000 customers in lieu of selling them unsuitable consumer credit insurance (CCI).
CCI is a type of add-on insurance which is offered to borrowers who avail credit cards, personal loans, home loans and car loans. In the event of sickness, grave injury, involuntarily unemployment, or unfortunate demise of the borrowers, their repayments are fulfilled through CCI.
During its investigation, ASIC found that CommBank sold ‘CreditCard Plus’, insurance for credit card repayments to 65,000 customers, such as students and unemployed people, who were unlikely to meet the employment criteria and would be unable to claim the insurance.
The regulator said that most often customers were not be aware that they signed up and paid for the cover, which could be included in the fine print of their loan documents.
Additionally, the Australian bank has agreed to repay nearly AUD586,000 ($461,290) in premiums to about 10,000 customers after it over-insured these customers for Home Loan Protection CCI taken out with a Commonwealth Bank home loan, resulting in the over-charging of premiums.
ASIC deputy chair Peter Kell said it was unacceptable that customers were sold insurance that did not meet their needs.
“One of ASIC’s priorities is addressing poor consumer outcomes associated with add-on insurance, including CCI. Consumers should not be sold products that provide little or no benefit, and banks should have processes in place that ensure this,” Kell added.
CommBank will contact eligible ‘CreditCard Plus’ customers and remediate customers who were sold ‘CreditCard Plus’ between 2011 and 2015, who were either unemployed or students.