Commonwealth Bank has been hit with 30 criminal charges relating the promotion and sale of consumer credit insurance.
It is the second time in two days that ASIC has used consumer protection provisions in the ASIC Act to file criminal charges against a bank.
ASIC alleges that between 2011 and 2015, CBA made false or misleading representations to customers that the insurance policies, CreditCard Plus and Loan Protection, had uses or benefits to those customers, when part or all of the benefits were not available.
CBA issued a statement saying it has co-operated with ASIC during its investigation and will plead guilty to the charges. It has agreed to a statement of fact with ASIC and the Commonwealth Director of Public Prosecutions.
The bank said the contraventions occurred when it did not adequately disclose to customers at the point of sale they that they were not eligible for certain benefits under the policies because of their employment status.
“In 2011 the wrong decision was made to remove qualifying questions about the employment status of a customer from some mandatory sales scripts. Those questions would have disclosed at the point of sale whether the customer would be eligible for certain benefits under those polices.”
CBA self-reported the matter to ASIC in 2015. It has compensated 165 customers.
Mis-selling of consumer credit insurance has been on ASIC’s radar for some time. In 2019, it released the findings of a review of the sector, saying the design and sale of CCI had consistently failed consumers. Products were of “low value” and sales practices “unfair”.
For CCI sold with credit cards, consumers received only 11 cents in claims for every dollar paid in premiums, and for CCI sold by lenders only 19 cents was recovered in claims for every premium dollar paid.
CCI was sold to consumers despite the fact they were ineligible to claim, telephone sales staff used high-pressure tactics and consumers were given non-compliant personal advice to buy unsuitable policies. Consumers were charged CCI premiums after their loan had been paid out.
ASIC said that if it did not see “early, significant and sustained improvement in the design and sale of consumer credit insurance” it might deploy its product intervention power.
CCI also came in for attention at the Hayne royal commission, which was equally critical.
Since then, many financial institutions have stopped selling the product.
Earlier this week ME Bank appeared in the Federal Court to answer criminal charges of allegedly making false and misleading representations in letters to its home loan customers.