A major law firm is considering a class action against Australian banks over the sale of millions of dollars of “worthless” credit card insurance.
The Commonwealth Bank last week admitted customers were sold insurance despite the fact they they were not eligible to make claims, and on Monday Slater and Gordon announced it is investigating potential class actions on behalf of customers for insurance that offered them little or no coverage.
Consumer credit insurance is often sold alongside financial products and provides coverage if a person is unable to meet repayments – usually due to death, disablement or illness.
Slater and Gordon class actions senior associate Andrew Paull said consumer credit insurance in Australia is “notorious for being unsuitable and consistently poor value”.
“We have found substantial evidence to suggest that a large number of Australian credit card holders are paying hundreds, if not thousands, of dollars a year for essentially worthless insurance,” Mr Paull said on Monday.
“Many policyholders are ineligible to claim some or all of the available benefits and others are either completely unaware they have the insurance or incorrectly believe it is a requirement for obtaining a credit card.
“The banks should know when this insurance is likely to be of no or limited value to their customers, however the evidence suggests that they have continued to push these products widely and have collected millions in premiums while doing so.”
Last week, the Commonwealth Bank said it will refund another $16 million to about 140,000 credit card and loan insurance customers after finding more people were sold policies they would not be able to claim on.
Australia’s biggest bank said it will stop selling its Credit Card Plus and Personal Loan Protection products and contact customers who may be ineligible for payouts because of their employment status at the time they bought their policies.
The refunds are in addition to the $10 million Commonwealth Bank last year agreed to pay back after the same credit card insurance was sold to 65,000 students and unemployed people who were ineligible to claim on it.
Mr Paull on Monday said if a breach over consumer credit card insurance is proven, affected customers would be able to recover compensation from their insurance providers.
He said the total potential refund could be in the tens of millions of dollars.
