ASIC has announced it has secured $160 million in remediation for consumers sold junk credit insurance from 11 major banks and lenders between 2011 and 2018.
These include offerings from ANZ, Australian Central Credit Union, Bank of Queensland, Bendigo and Adelaide Bank, Citigroup, Commonwealth Bank, Credit Union Australia, Latitude Finance Australia, NAB, Suncorp-Metway and Westpac.
ASIC deputy chair Karen Chester said the investigation of major banks and lenders uncovered the design and sale of consumer credit insurance consistently failed customers.
"As a result of the widespread failings in CCI we identified last year, ASIC has investigations underway and has secured a significant program of remediation for consumers," she said.
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"Over $160 million will be back in the pockets of close to half a million consumers sold this junk insurance.
"Our trifecta of regulatory action - the 2019 report, enforcement investigations and now remediation outcomes - shows how we can and will comprehensively intervene when we find systemic failings and misconduct."
To date, lenders and insurers have already paid over $128 million to over 312,000 consumers, ASIC said. A further $32 million will be paid to more than 122,000 consumers, taking the total consumer credit insurance remediation to over $160 million for 434,000 consumers.
"ASIC's work has ensured these remediation programs are not only consumer-focused but also robust," Chester said.
"It's both unfair to consumers and ultimately costly to business to sell junk insurance."
The sales practices of this product were systematic and unjust, she said.
"There is nothing fair about selling on-going consumer credit insurance to a 65-year-old when eligibility falls away at 66," Chester said.
"There is nothing fair about selling insurance with involuntary unemployment cover to an unemployed worker.
"These sales practices were systemic and through ASIC's work, hundreds of thousands of consumers like these ones, have been compensated."
Since the release of ASIC's initial report in July 2019, all lenders were no longer selling consumer credit insurance with credit cards, personal loans or home loans, ASIC said.
However, it found that thousands of existing customers continue to hold and pay premiums for consumer credit insurance policies.
"ASIC will continue to collect and publish claims ratios to check how CCI products provide value to consumers and ensure ongoing public transparency," the watchdog said.
To safeguard consumers, ASIC has banned "cold-call" telephone sales of consumer credit insurance, worked with industry to incorporate a four-day deferred sales period into the Banking Code of Practice and the General Insurance Code of Practice, and set out guidance for all lenders who sell consumer credit insurance.