Westpac hit with $1.5 million fine over credit insurance

Westpac has been hit with a $1.5 million penalty over a consumer credit insurance dispute.

The big four bank has been ordered to pay a $1.5 million penalty by The Federal Court of Australia for selling credit insurance to almost 150 customers who had not requested it.

The ASIC reported from April to July 2015, Westpac issued consumer credit insurance policies to 141 customers who did not request the product. Each one of these unknowing customers were sent a letter that asserted the insurance premiums needed to be paid and debited payment of these amounts from the consumers credit card.

The court found Westpac did not have the right to these payments and customers were not liable to pay them.

Westpac have admitted too:

• Asserted a right to payment for the consumer credit insurance premiums, which customers were not liable to pay in contravention of s12DM of the ASIC Act; and
• Failed to comply with financial services laws under s912A(1)(c) of the ASIC Act.

Responding to the case, ASIC Deputy Chair Sarah Court said: “ASIC has identified consumer credit insurance to be a poor value product that leads to poor outcomes for consumers. In this case, customers were charged for insurance policies they had not agreed to buy and therefore were unlikely to use. The sale of these products benefitted the bank and not the consumer.”

This is not the first time consumers’ financials have been harmed by the sale of consumer credit insurance due to Westpac.

A related case is Westpac’s Credit Card Repayment Protection and Flexi-Loan Repayment Protection policies, which were add-on insurance products sold with credit cards and lines of credit.

“In December 2021, Westpac agreed with ASIC to resolve legal proceedings, filed by ASIC in April 2021 in the Federal Court, which relate to the sale of consumer credit insurance (CCI) products. This settlement was one of a number of longstanding regulatory issues previously disclosed,” the bank said.

Claimo have now helped over 3,000 customer claims over $10 Million of junk insurance premiums. In our most recent media appearance on channel 9, Nicole Gallpen told her story to millions of viewers that she was expecting to receive just $900 but ended up receiving $12,000 from the unnecessary costs of add-on insurance policies added to her car loan. Check out our appearance and Nicole’s story here.

Australians who have paid for so-called “junk insurance” are now clawing back hundreds of millions in cash from the big banks and the finance sector through private services like Claimo, and ASIC remediation programs and class actions. You can read more about add-on insurance class actions here