The Federal Court of Australia (Federal Court) has ordered Australian bank and financial services provider Westpac Banking Corporation (Westpac) to pay a $1.5 million penalty for mis-selling consumer credit insurance to customers who did not want to buy it, according to the Australian Securities and Investments Commission (ASIC).
The ASIC reported that from April to July 2015, Westpac issued consumer credit insurance policies to 141 customers who did not request the product. It then sent a letter to each customer asserting the right to payment of insurance premiums and debited the amount from the customer's credit card or facility.
Westpac admitted it had:
Therefore, the Federal Court ruled that Westpac did not have the right to these insurance premium payments, so customers were not liable to pay them.
ASIC has secured $270 million in remediation across the insurance sector for consumers harmed by the sale of consumer credit insurance. Its action was related 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.
Commenting on the case, 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.”
Justice Katzmann added: “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.”
The recent Westpac case came after it joined other banks and financial institutions in Australia to pay, or offer to pay, a total of $3.15 billion in compensation to customers who suffered loss or detriment due to “fees for no service” misconduct or “non-compliant advice.”
