Big 4 banks may face class action on credit card insurance
As the Banking Royal Commission begins tomorrow, the big four are facing class action over credit card insurance
We take out insurance to provide peace of mind and avoid risk, but now, the big four banks — CBA, Westpac, ANZ and NAB — are facing a multimillion dollar class action over credit card insurance that’s been labelled worthless.
Hundreds of thousands of customers are estimated to have taken out coverage they didn’t want and couldn’t use.
After taking out a personal loan to cover her daughter’s TAFE fees, bank customer Maryanne Harrison asked her bank about an extra charge on her statement.
“CGU insurance had been taking money out of my account and they said you’ve signed up for that, that’s an insurance cost,” Harrison told Nine news.
Consumer credit insurance is supposed to cover repayments if you lose your job or become unwell.
But a study by watchdogs such as the Financial Ombudsman Service found credit insurance has fewer claims than other types of insurance, with the most claims denied and the lowest payouts.
Law firm Slater and Gordon is launching a class action against banks over credit card insurance, saying for most customers it’s effectively worthless.
“The scripts that are used to sell the product often don’t mention exclusions. And they often don’t require people to say they’d like the insurance, so many people don’t even know they’re paying for it,” Andrew Paul from Slater and Gordon said.
The law firm says banks have been selling insurance to people who were ineligible to claim — such as those who are unemployed, work casually, are on Centrelink benefits, or even retirees.
The Commonwealth Bank last week said it would repay 16 million dollars to more than 140,000 customers who bought worthless loan insurance.
Consumer groups say that’s a fraction of what banks have made from those products.
“We estimate it has cost the Australian Public about a billion dollars in the past 10 years of mis-sold insurance products,” Amanda Storey from Consumer Action Law Centre said.
“The timing of all this isn’t coincidental, pressure is ramping up on the banks again tomorrow – with the first public hearings of the royal commission. Among the topics being discussed is credit insurance,” Storey said.
Bank customer Harrison said she wants the banks to do better:
“I was probably very vulnerable at the time, I doubt very much they would have explained it to me.”