Australia's biggest bank, Commonwealth Bank (CBA), will refund about A$10 million (US$7.8 million) to more than 65,000 customers after the corporate regulator found it had sold them unsuitable consumer credit insurance (CCI).
The bank will also refund about A$586,000 in premiums after over-insuring nearly 10,000 customers against their home loan.
The Australian Securities and Investments Commission (ASIC) said in a statement that CBA sold the CreditCard Plus insurance along with credit cards, personal loans, home loans and car loans between 2011 and 2015.
The insurance is typically marketed to borrowers to help them meet repayments if they become sick, injured or involuntarily unemployed, but these 65,000 customers were students or unemployed and therefore unlikely to meet the criteria necessary to make a claim, ASIC found.
ASIC deputy chair Peter Kell said it was unacceptable that customers were sold insurance that did not meet their needs.
“One of ASIC’s priorities is addressing poor consumer outcomes associated with add-on insurance,” Mr Kell said.
“Consumers should not be sold products that provide little or no benefit, and banks should have processes in place that ensure this.”
The regulator also found that, between 2007 and 2015, CBA did not adjust the amount of cover under a policy if customers borrowed an amount less than the original loan they applied for. This resulted in about 10,000 customers being charged for more cover than they needed under the policy.
This is the second time this month that ASIC has ordered a refund to customers for CCI.
Earlier, QBE Insurance had to refund 35,000 customers up to A$15.9 millions in premiums paid for cover bought through car dealerships that provided little or no benefit.
Mr Kell had said then: “We put all add-on insurers on notice following our review.
“Insurance must meet the needs of the consumer first and foremost. All add-on insurers should review the sale of policies and refund consumers who were sold policies they didn’t need.”