CBA sued over ‘junk’ credit card insurance

Commonwealth Bank is being targeted in a class action launched by legal firm Slater and Gordon.

Commonwealth Bank has acknowledged the class action and is reviewing its options.

Commonwealth Bank is being targeted in a class action launched by legal firm Slater and Gordon for allegedly selling “junk” credit card and personal loan insurance to unwitting customers for an eight-year period until 2018.

The action, filed in the federal court on Wednesday, claims that 200,000 people were sold credit protection policies designed to guard them against job losses, despite the fact that the customers were either unemployed or marginally employed at the time they took up the policies.

This meant it was unlikely they would ever be able to claim against the policy they were paid for, with payout rates alleged to be as low as 10-15 per cent of premiums collected.

The products — Creditcard Plus and CBA Loan Protection — drew criticism during the banking royal commission, where it was revealed the bank’s current chief executive Matt Comyn pushed for the bank to stop selling the products while retail banking head in 2015.

Mr Comyn was subsequently — and famously — advised by then chief executive Ian Narev to “temper your sense of justice”, with the former chief arguing the products were valid.

They continued to be sold until March 2018, with CBA in 2017 agreeing to repay up to $16m to customers who purchased the policies despite them being unsuitable for their circumstances, although this was dismissed as inadequate by law firm Slater and Gordon. Practice group leader Andrew Paull called the move “a tokenistic effort to protect the bank’s brand, rather than a genuine attempt to make good its past wrongdoing”.

“This is reprehensible behaviour by the bank, which has chosen to compensate only a negligible portion of its customers, despite their admission that they knew the insurance was worthless,” Mr Paull said.

“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.”

The law firm is yet to quantify the value of the class action but flagged it could blow out as more people sign up.

“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,” Mr Paull said.

He called on CBA to “do the right thing” and ensure that all who are entitled to compensation receive it.

The statement of claim noted that the Australian Securities & Investments Commission had reviewed the insurance sales practices of major banks as early as 2011 and had identified concerns with their sales methods and issued recommendations about how they should be handled.

Commonwealth Bank has acknowledged the class action and is reviewing its options.

“CBA is reviewing the claim and will provide any update as required,” a spokesman said.