Australian Securities and Investments Commission: ABC pleads guilty to criminal charges of mis-selling consumer credit insurance

VICTORIA, Australia, October 30 (TNSRep) — The Australian Securities and Investments Commission issued the following press release:

the Commonwealth Bank of Australia (CBA) pleaded guilty to 30 criminal charges for making false or misleading statements to 165 customers when selling consumer credit insurance.

The 30 criminal offenses relate to CBA’s provision of CreditCard Plus and Loan Protection policies as a supplemental insurance product sold in-branch, over the phone and online.

Between 2011 and 2015, the ABC made false or misleading statements to its customers that they could make a claim against their insurance policies when some or all of those claims were unavailable to them.

Vice President of ASIC Sarah Court stated that “ASIC has been concerned for some time about consumer harms associated with supplemental insurance. ASIC filed a criminal case against the ABC after it became clear that customers had been sold insurance they had no use for.

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The conduct of the ABC was the subject of a case study by the royal commission in misconduct in banking, pensions and financial services – see volume 2 of the interim report (pages 51-64).

This action is part of ASIC’s priority to address consumer harm in insurance. It follows ASIC’s detailed review of the sale of consumer credit insurance by 11 major banks and other lenders. Report 622, Consumer Credit Insurance: Poor Value Products and Harmful Sales Practices, published in July 2019, found that the design and sale of consumer credit insurance has consistently disappointed consumers. ASIC found that this insurance was of low value, its sales practices and product design caused harm to consumers, and consumers were wrongly charged (19-180MR).

“Following a review of consumer credit insurance, ASIC has prohibited the unsolicited sale of this insurance through cold calling, secure on $250 million in damages for customers and filed a civil action against Westpac. Today we are adding criminal charges against the CBA. These interventions were necessary because the industry failed to put customers first,” concluded Vice President Court.

The case was prosecuted by CDPP after investigation and referral by ASIC.

The matter has been adjourned to a date yet to be set.

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ASIC Report 256, Consumer Credit Insurance: A Review of Sales Practices by Authorized Depository Institutions, published in October 2011made 10 recommendations to reduce the risk of mis-selling CCI to consumers.

In April 2021ASIC filed a separate civil action against Westpac Banking Corporation for its practices in the sale of consumer credit insurance products (21-066MR).

Included between October 2011 and July 2015 (period of offence), the maximum penalty for these offenses has been increased from $1,100,000 at $1,700,000 by violation.

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REPORT: https://financialservices.royalcommission.gov.au/Documents/interim-report/interim-report-volume-2.pdf

Aurora J. William