ASIC media releases are point-in-time statements. Please note the date of issue and use the internal search function on the site to check for other media releases on the same or related matters.
22-084MR Westpac to pay $1.5 million penalty for mis-selling consumer credit insurance
The Federal Court has ordered Westpac Banking Corporation pay a $1.5 million penalty for mis-selling consumer credit insurance with its credit cards and Flexi Loans to customers who had not agreed to buy insurance policies.
From April 2015 to February 2017, Westpac issued consumer credit insurance policies to 141 customers who did not request the product. Westpac then sent a letter to each customer asserting the right to payment of insurance premiums and debited payment of these amounts from the customer’s credit card or facility. The Court found Westpac did not have the right to these payments and customers were not liable to pay them.
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.
‘ASIC has secured $270 million in remediation across the sector for consumers harmed by the sale of consumer credit insurance. 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.’
Justice Katzmann said ‘I am persuaded that the agreed penalty is an appropriate one’ and in reaching this decision considered the contraventions were not deliberate, reckless or systemic, although noted there was a lack of care. Justice Katzmann also noted Westpac’s conduct, though serious, did not warrant a penalty near the upper end of the scale.
ASIC’s action relates to 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.
Westpac admitted that it had:
- 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 Corporations Act.
This action forms part of ASIC’s priority to address consumer harms in insurance. It follows a detailed ASIC review of the sale of consumer credit insurance by 11 major banks and lenders. ASIC’s Report 622, Consumer credit insurance: Poor value products and harmful sales practices, published in July 2019, revealed that the design and sale of consumer credit insurance had consistently failed consumers. ASIC found that it was poor value, its sales practices and product design caused consumer harm and consumers were being incorrectly charged for the insurance (19-180MR).
ASIC’s Report 256, Consumer credit insurance: A review of sales practices by authorised deposit-taking institutions, published in October 2011, made 10 recommendations to reduce the risk of consumer credit insurance being mis-sold to consumers.
ASIC’s follow up Report 622, Consumer credit insurance: Poor value products and harmful sales practices, published in July 2019, revealed that the design and sale of consumer credit insurance had consistently failed consumers (19-180MR).
In May 2020, ASIC announced that its work had led to over $160 million in remediation for consumers sold junk consumer credit insurance by lenders, including Westpac (20-115MR), and by April 2021 remediation had grown to over $250 million (21-066MR). ASIC continues to monitor ongoing remediation by the sector, which has collectively now exceeded $270 million.
ASIC’s Moneysmart website has information about consumer credit insurance and how it works.