Law firm Slater and Gordon has filed class action proceedings in the Federal Court against National Australia Bank (NAB) and MLC on behalf of customers who were sold “worthless” credit card insurance.

The action alleges NAB and MLC “engaged in unconscionable conduct” by selling life and income protection cover to cardholders who were ineligible to claim under the terms of the policy.

Slater and Gordon Class Actions Principal Lawyer Andrew Paull says most people were sold the insurance over the phone and were not given a reasonable opportunity to understand the terms and conditions.

“In the case of the life cover, the policy was of minimal value to many customers,” he said. “Both NAB and MLC were in much stronger bargaining positions than any of the people they were contacting and selling this insurance to.

“They have taken advantage of hundreds, potentially thousands of their loyal customers.”

He says million of dollars were made in premiums by selling to customers including students, the unemployed and people on disability pensions – all of whom were ineligible to claim the main benefits under the policy.

Slater and Gordon says casual, contract or self-employed workers were subject to exclusions from the income protection coverage, but were not made aware of this.

Customers with existing life and/or income protection insurance were also encouraged to take out insurance on their credit card, despite already being covered.

Mr Paull says Slater and Gordon believes these practices amount to unconscionable conduct in breach of section 12CB of the ASIC Act.

“We believe NAB’s and MLC’s conduct falls well short of the standard of behaviour the industry expects. In short, they have taken advantage of people knowing that they can’t cover them.

“NAB and MLC have been fleecing consumers of millions and it’s only right that they pay it back.”