The Australian Securities and Investments Commission (ASIC) says companies mis-selling insurance could face higher penalties in future, after Westpac was ordered by the Federal Court to pay $1.5 million over the sale of add-on products to consumers who had not agreed to buy the policies.

The court action follows an ASIC review of the sale of consumer credit insurance by 11 major banks and lenders, which has led to $270 million in remediation payments across the sector.

“The industry is now clearly on notice as to the consumer harm associated with the mis-selling of these products, and under the new penalty regime ASIC will be seeking significantly increased penalties for misconduct of this kind,” Deputy Chairman Sarah Court said.

The Westpac penalty related to consumer credit insurance policies issued to 141 customers who did not request the product from April 2015 to February 2017.

“ASIC has identified consumer credit insurance to be a poor value product that leads to poor outcomes for consumers,” Ms Court said.

“In this case, customers were charged for insurance policies they had not agreed to buy and therefore were unlikely to use. The sale of these products benefitted the bank and not the consumer.”

Westpac says it has not sold consumer credit products since 2019 and has remediated affected customers.

“We apologise to the affected customers and remain focused on putting things right and simplifying our business,” a spokesman said. “Westpac and ASIC agreed a statement of agreed facts and penalty amount of $1.5 million which the court has approved.”