Big banks could face a class action over the sale of millions of dollars of "worthless" credit card insurance.
Commonwealth Bank, the country's biggest bank, has already admitted selling loan and credit card insurance to customers who were not eligible to make claims, and law firm Slater and Gordon is now investigating potential class actions on behalf of short-changed consumers, reports Australian Associated Press.
Slater and Gordon class actions senior associate Andrew Paull said yesterday that consumer credit insurance - which is often sold alongside financial products to provide coverage if a person is unable to meet repayments - 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.
"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."
CBA last week said it was refunding A$16 million (US$12.6 million) to about 140,000 personal loan and mortgage insurance customers after finding people were sold policies they would not be able to claim on. The refund came on top of A$10 million it last year agreed to pay back after the credit card insurance was sold to 65,000 students and unemployed people who were ineligible to claim on it.
"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 continued to push these products widely and have collected millions in premiums while doing so," Mr Paull said.