ASIC takes Westpac to court over alleged unfair sales of consumer credit insurance
Australia’s corporate regulator has started court action against Westpac for alleged misleading and unfair sales of consumer credit insurance.
The Australian Securities and Investments Commission announced on Thursday it had begun civil proceedings against the bank in the Federal Court.
The action relates to the bank’s credit card repayment protection and flexi-loan repayment protection policies, which are insurance products sold with credit cards and lines of credit.
ASIC alleges Westpac made false or misleading representations between April 7 to July 28, 2015 that customers had agreed to acquire and were liable to pay for consumer credit insurance and that the bank had a right to charge it.
The premiums were allegedly debited unlawfully to 384 customers.
The regulator further alleges the bank asserted a right to payment for the insurance premiums that customers were not liable to pay.
The bank also failed to ensure its financial services were provided “efficiently, honestly and fairly” when it supplied the insurance to customers who had not agreed to acquire it and charged premiums to their accounts, it is alleged.
“Each customer was exposed to the risk of having to make payments unlawfully debited by Westpac on an ongoing basis. It was a real risk given that each payment was relatively small and liable not to be noticed,” ASIC alleged in court documents.
“The customers were liable to pay interest on any unpaid amounts that were added to the overall amount owing.
“Further, each customer had cast upon him or her the burden of complaining to Westpac and taking steps to end the unlawful debits to the customer’s account over which Westpac had control.
“On a broader level, Westpac’s conduct undermined confidence in the financial system.”
ASIC alleges the bank failed to comply with financial services laws and is asking the court to make declarations to that effect and issue financial penalties.
In a statement to the Australian Stock Exchange on Thursday, Westpac said it is carefully considering the claims.
“Westpac acknowledges the proceedings announced by ASIC today in relation to the sale of consumer credit insurance (CCI) products to approximately 384 customers,” the bank said.
“The proceedings relate to allegations that Westpac supplied CCI to certain customers who had not requested or agreed to acquire this product.
“Westpac is carefully considering these claims and is committed to working constructively with ASIC through the Court process.”
Westpac said it has not sold CCI products since 2019.
The court action forms part of ASIC’s moves to address consumer harms in insurance following its detailed review of consumer credit insurance by 11 major banks and other lenders.
The regulator’s July 2019 report found the design and sale of consumer credit insurance was poor value, caused consumer harm, incorrectly charged consumers and had consistently failed them.
“ASIC’s deep dive investigations in late 2018 and into 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,” ASIC deputy chair Karen Chester said.
ASIC said it had secured more than $250 million of remediation for consumers harmed by the practices of the offending lenders.
Its remediation program covering 11 major banks and other lenders has returned on average more than $430 to more than 580,000 consumers.
“ASIC will continue to take action where we identify potential breaches of the law where the design and sale of financial products to consumers fails the litmus test of … efficiency, honesty and fairness,” Ms Chester said.
The court date against Westpac is yet to be set.
Originally published as ASIC takes Westpac to court over alleged unfair sales of consumer credit insurance
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