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CBA sued over 'junk' insurance products

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Law firm Slater and Gordon has filed a class action against Commonwealth Bank (CBA), accusing the country’s biggest lender of selling “junk” consumer credit insurance (CCI) products.

The bank issued a statement this afternoon, acknowledging the legal proceedings.

“The class action relates to consumer credit insurance for credit cards and personal loans that was sold between January 1 2010 and March 7 2018,” the statement said. “CBA is reviewing the claim and will provide any update as required.”

The action filed yesterday in the Federal Court of Australia follows similar lawsuits earlier this year against ANZ and Westpac by Slater and Gordon. The law firm also notched a victory last year after NAB agreed to pay $49.5 million in compensation to affected customers.

CBA and Colonial Mutual Life Assurance Society, which the bank sold to AIA in 2017, are named as respondents in the class action on behalf of customers who were sold CBA CreditCard Plus and CBA Loan Protection products.

While the sales of these products ceased in March 2018, existing policies have been rolled over and many customers are still being charged thousands of dollars in fees, Slater and Gordon says.

The class action alleges the respondents have engaged in unconscionable conduct, misleading or deceptive conduct and failed to act in the best interest of customers.

The law firm says a remediation program that was launched after the bank stopped selling the products did not adequately compensate customers.

“This move to return only a small portion of its customers' premiums seems to have been a tokenistic effort to protect the bank’s brand, rather than a genuine attempt to make good its past wrongdoing,” Practice Group Leader Andrew Paull said.

“Slater and Gordon is still being contacted by large numbers of Commonwealth Bank customers who should never have been sold the products, yet have never been remediated.”

The class action against CBA comes as the Australian Securities and Investments Commission (ASIC) continues to crack down on the mis-selling of CCI, which was exposed as a trouble spot during the Hayne royal commission hearings in 2018. CBA executives admitted many customers were sold the products despite not meeting the criteria.

An ASIC report into CCI last year found products sold by CBA from 2011-2018 have a combined declined and withdrawn claim rate of 30.1%, the second highest after Citigroup.

The report found CCI consumers only got back 19 cents in claims for every dollar of premiums paid. The ratio is worst when it comes to CCI that was bundled with credit cards, with policyholders getting just 11 cents.

Financial services providers including insurers identified in the ASIC report have stopped selling CCI with credit cards, personal loans and home loans. More than $160 million in financial compensation has been paid to 435,000 customers under a remediation program ordered by ASIC.