The Australian Securities and Investments Commission (ASIC) has taken Federal Court action against Westpac over the sale of consumer credit insurance (CCI), alleging it debited premiums for cover that was never requested and through its actions has undermined confidence in the financial system.

“Each of the affected customers noticed the debit or debits of amounts for CCI premiums and complained to Westpac,” the court documents filed by ASIC say. “Some noticed soon after they took out the relevant credit facility and some did not notice for some time.”

ASIC says customers were exposed to the risk of having to make payments on an ongoing basis, given the amounts were relatively small and liable not to be noticed.

“Further, each customer had cast upon him or her the burden of complaining to Westpac and taking steps to end the unlawful debits to the customer’s account over which Westpac had control,” it says. “On a broader level, Westpac’s conduct undermined confidence in the financial system.”

The action, which seeks declarations and financial penalties, relates to credit card repayment and flexi-loan repayment protection policies sold to about 384 customers from April 7 2015 to July 28 2015.

“Leading up to and during the penalty period, Westpac supplied CCI to many customers who had not requested CCI and who had not agreed to acquire CCI,” ASIC alleges in the documents. “The total number of affected customers is unknown to ASIC.”

ASIC’s action was noted by Westpac, which stopped selling CCI products in 2019.

“Westpac is carefully considering these claims and is committed to working constructively with ASIC through the court process,” it said in a statement to the Australian Securities Exchange.

ASIC two years ago released a review of CCI sales by 11 major banks and other lenders, finding sales practices and product design caused consumer harm and buyers were being incorrectly charged.

A remediation program has secured more than $250 million, returning on average over $430 to more than 580,000 consumers.