In a recent review of the sale of consumer credit insurance in Australia by ASIC has found "unacceptable sales practices, poor product design and significant remediation costs in CCI sold by major banks and lenders."
ASIC’s review found that:
- CCI is extremely poor value for money – for CCI sold with credit cards, consumers received only 11 cents in claims for every dollar paid in premiums. Across all CCI products sold by lenders, only 19 cents was recovered in claims for every premium dollar which consumers paid.
- CCI sales practices caused consumers harm:
- consumers were sold CCI despite the fact they were ineligible to claim under their policy
- telephone sales staff used high-pressure selling and other unfair sales practices when selling CCI, and
- consumers were given non-compliant personal advice to buy unsuitable policies.
- Consumers were incorrectly charged for CCI, including being charged ongoing CCI premiums even though they no longer had a loan.
- Many lenders did not have consumer-focused processes to help consumers in hardship make a claim under their CCI policy.
I think it worthwhile highlighting the issue of consumer harm and the costs of remediation:
- ASIC’s work has led to a significant remediation program expected to exceed $100 million paid to over 300,000 consumers. To date, over $51 million has been paid to over 186,000 consumers. ASIC’s work to secure further compensation will continue.