Shine Lawyers eyes potential class action against Aussie Home Loans over 'worthless' insurance

A potential class action against non-bank lender Aussie Home Loans is being investigated by Shine Lawyers following a number of complaints received from loan customers alleging they were sold income protection policies that were ‘worthless’.

Shine Lawyers, part of the Shine Justice (ASX: SHJ) group, says the claim could involve tens of thousands of Aussie Home Loans customers who were sold a mortgage protection policy to cover their home loan repayments due to illness, death or loss of employment.

Shine’s class actions practice leader Rebecca Jancauskas says home loan customers have been paying an extra $1,000 or more a year for these policies even though many of them may have already been covered by similar or better policies.

Jancauskas tells Business News Australia that Shine Lawyers instigated the class-action investigation after being approached by a number of customers who had complained about the Aussie Home Loans mortgage protection policy.

“All, if not most of them, had superior cover through their superannuation and so the insurance they were sold through Aussie was unnecessary and of very little value to them given the restrictions that applied to the policy,” Jancauskas says.

“It was also substantially more expensive than the group insurance they had which offered superior protection for them.”

Shine has not yet determined the value of a potential class action, but Jancauskas says the first step is to establish whether there is scope to proceed.

“We’re trying to understand the experiences of other policyholders and to understand whether they align with the individuals that have contacted us,” she says.

“It’s really about understanding what representations were made to them, the basis upon which they entered the policies and what their expectations were.”

Shine’s investigation will examine whether Aussie Home Loans owed a duty of care to act in the best interest of its clients, whether that duty was breached, and whether the sales pitch to borrowers was misleading or deceptive, or amounted to unconscionable conduct.

Jancauskas says first-home buyers were most likely to have bought these policies.

“It’s hard enough to get a foot on the property ladder, and if brokers are selling unnecessary insurance, it makes it even harder,” she says.

“Buying a home is a complex and stressful process. We’re investigating whether Aussie Home Loans exploited its clients by selling them a policy that was essentially worthless.”

The investigation will explore any mortgage protection policy bought from Aussie Home Loans since 2016. Jancauskas believes the policies are still being offered to Aussie Home Loan customers.

Aussies Home Loans, a former Commonwealth Bank of Australia (ASX: CBA) subsidiary, is now part of the Lendi Group following a merger of the businesses in 2021. CBA retains a significant shareholding in the merged group.

Prior to the merger Aussie Home Loans had a $70 billion loan book and 200,000 customers.