The Commonwealth Bank of Australia (ASX: CBA) went on the front foot yesterday by announcing it would plead guilty to 30 criminal charges filed against the company in the Federal Court relating to allegations of mis-selling consumer credit insurance.
CBA is facing fines of up to $51 million in total after being charged with making false or misleading representations to 165 customers sold loan protection insurance between 2011 and 2015. It is alleged CBA didn’t adequately disclose to those customers that they were not eligible for certain benefits under the insurance policies due to their employment status.
The products, namely CreditCard Plus and Loan Protection, were optional consumer credit insurance policies sold with CBA credit card finance and promoted at CBA branches, by telephone and online.
CBA revealed in a statement of facts that it offered staff a range of incentives to promote the products, including financial bonuses for reaching sales targets, $2,500 Flight Centre gift vouchers and $250 Red Balloon gift vouchers, as well as Apple iPads and travel money cards valued up to $500.
“In 2011, the wrong decision was made to remove qualifying questions about the employment status of a customer from some mandatory sales scripts,” CBA said in a statement to the ASX.
“Those questions would have disclosed at the point of sale whether the customer would be eligible for certain benefits under those policies.”
CBA says it has "co-operated fully" with the corporate watchdog ASIC (Australian Securities and Investment Commission) during its investigation, and with the referral process to the Commonwealth Director of Public Prosecutions.
“CBA will plead guilty to the charges and has agreed a statement of facts with ASIC and the Commonwealth Director of Public Prosecutions,” the banking giant says.
The ASIC investigation was undertaken as a test case stemming from the Financial Services Royal Commission. CBA says it has compensated the 165 customers affected.
“CBA apologises to customers who were affected by these issues and accepts that this conduct was unacceptable,” it says.
The CBA prosecution comes on the heels of ASIC filing charges against ME Bank and Westpac this year in relation to consumer protection provisions of the ASIC Act.
The maximum penalty for each offence increased from $1.1 million to $1.7 million in 2011, meaning CBA faces up to $51 million in fines for the breaches.
The matter is to be listed for first mention in the Federal Court in Sydney on a date yet to be fixed.
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