Australia's corporate watchdog has yet again commenced civil penalty proceedings in the Federal Court against Westpac (ASX: WBC), this time alleging the bank mis-sold consumer credit insurance (CCI) to customers who had not agreed to buy the policies.
The Australian Securities and Investment Commission (ASIC) action relates to WBC's discontinued Credit Card Repayment Protection and Flexi-Loan Repayment Protection policies.
Both were add-on insurance products sold with credit cards and lines of credit, and ASIC alleges Westpac made false or misleading representations that customers had agreed to acquire the CCI.
Further, the watchdog alleges WBC asserted a right to payment for the CCI premiums which customers were not liable to pay, while failing to comply with the ASIC Act and ensure its financial services were provided honestly and fairly.
The action follows an ASIC review of the sale of CCI by 11 major banks and lenders, which revealed the design and sale of the insurance product failed consumers.
The 'Consumer credit insurance: Poor value products and harmful sales practices' report found CCI was of poor value, and the product's sales and its design caused harm to consumers.
"ASIC's deep dive investigations in late 2018 and into 2019 found lenders had disappointingly not changed policies and conduct to stem harms from the design and sale of CCI. As a result, we've commenced civil proceedings against Westpac," ASIC deputy chair Karen Chester said.
"In addition to our enforcement action, ASIC has secured over $250 million of remediation for the consumers harmed by the practices of the offending lenders.
"ASIC will continue to take action where we identify potential breaches of the law where the design and sale of financial products to consumers fails the litmus test of section 912A efficiency, honesty and fairness."
In response, Westpac says it will work "constructively with ASIC" through the Federal Court process.
The Big Four Bank says the allegations relate to the sale of CCI to approximately 384 customers. In addition, WBC says it has not sold CCI products since 2019.
As of May 2020, ASIC's work has led to more than $160 million in remediation for consumers who were sold junk CCI by lenders.
The watchdog says it continues to monitor ongoing remediation by the sector, which has now collectively exceeded $250 million.Never miss a news update, subscribe here. Follow us on LinkedIn, Instagram and Twitter.
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