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ASIC had taken action against Westpac for its Credit Card Repayment Protection and Flexi-Loan Protection policies, which were add-on insurance products sold with credit cards and lines of credit.
From April to July 2015, Westpac had issued consumer credit insurance policies to 141 customers who did not request the product.
The bank then sent a letter to each customer asserting the right to payment of insurance premiums and debited payment of the amounts from the consumer’s credit card or facility.
The court has now found that Westpac did not have the right to these payments and customers were not liable to pay them.
Westpac admitted that it had:
- Asserted a right to payment for the consumer credit insurance premiums that customers were not liable to pay in contravention of s12DM of the ASIC Act
- Failed to comply with financial services laws under s912A(1)(c) of the ASIC Act
The bank has not sold consumer credit insurance since 2019, after an ASIC review ruled the design and sale of the product had consistently failed customers.
ASIC deputy chair Sarah Court commented the regulator had identified consumer credit insurance to be a “poor value product that leads to poor outcomes”.
“In this case, customers were charged for insurance policies they had not agreed to buy and therefore were unlikely to use,” Ms Court said.
“The sale of these products benefitted the bank and not the consumer.”
Justice Anna Katzmann stated that she considered the contraventions were not deliberate, reckless or systemic, but there had been a lack of care.
She thus noted Westpac’s conduct, although serious, did not warrant a penalty at the upper end of the scale.
“I am persuaded that the agreed penalty is an appropriate one,” Justice Katzmann said.
ASIC has secured $270 million in ongoing remediation across the lending sector for consumers harmed by the sale of consumer credit insurance, which included Westpac.
The corporate cop had undertaken a review of consumer credit insurance, as sold by 11 major banks and lenders.
The resulting report published in July 2019 ruled it was poor value, its sales practices and product design caused harm and consumers were being incorrectly charged for the insurance.
Ms Court warned future perpetrators could face harsher punishments.
“The industry is now clearly on notice as to the consumer harm associated with the mis-selling of these products, and under the new penalty regime ASIC will be seeking significantly increased penalties for misconduct of this kind,” Ms Court said.
Earlier this week, ASIC also launched a lawsuit against Macquarie, alleging the group failed to monitor third-party withdrawals from customer accounts.
[Related: Corporate watchdog sues Macquarie]
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