Westpac sued over ‘misleading’ sale of consumer credit insurance

The corporate regulator alleges Westpac made almost 400 customers pay for credit insurance policies they had never bought.

Westpac is facing civil court action over the sale on unwanted consumer credit insurance. Picture: Christian Gilles

The corporate regulator has launched civil proceedings against Westpac for allegedly mis-selling consumer credit insurance (CCI) to credit card holders and other customers who had not agreed to purchase the policies.

The Australian Securities and Investments Commission said the Federal Court proceedings relate specifically to the bank’s credit card repayment protection and flexi-loan repayment protection products.

ASIC is seeking unspecified penalties.

The regulator alleges that from April 7 2015 to July 28 2015 Westpac made false or misleading statements that implied approximately 384 customers had agreed to purchase one or both of the insurance products, that they were liable to pay for them, and that Westpac had a right to charge customers in relation to them.

Additionally, ASIC said the bank asserted a right for payment for the insurance premiums when the customer was not liable to pay for it, meaning Westpac failed to comply with financial service laws and failed in its duty to provide financial services “efficiently, honestly and fairly.”

Westpac stopped selling consumer credit insurance policies in 2019.

ASIC deputy chair Karen Chester said the action forms part of ASIC’s broader goal of addressing consumer harm in the insurance industry.

“ASIC’s deep dive investigations in late 2018 and into 2019 found lenders had disappointingly not changed policies and conduct to stem harms from the design and sale of CCI,” she said.

‘In addition to our enforcement action, ASIC has secured over $250 million of remediation for the consumers harmed by the practices of the offending lenders.

“The CCI remediation program covers 11 major banks and other lenders and has returned on average over $430 to over 580,000 consumers. Our trifecta of regulatory action – our 2019 report, targeted investigations to initiate enforcement action and remediation – collectively brings transparency, deterrence and rectification to CCI misconduct.”

The action against Westpac comes just one day after the prudential regulator approved a culture and risk process remediation plan for the bank after it failed to adequately reform the flaws that led to multiple breaches of anti-money laundering laws and Australia’s largest corporate fine of $1.3bn.

In a statement released to the ASX on Thursday Westpac acknowledged the proceedings commenced by ASIC and said it was considering the regulator’s case.

“ASIC is seeking, among other things, declarations of contraventions of certain civil penalty provisions and unspecified monetary penalties relating to the period from 7 April 2015 to 28 July 2015,” the bank said.

“Westpac is carefully considering these claims and is committed to working constructively with ASIC through the court process.”

Ms Chester said ASIC would continue to take action against financial institutions that may have breached the law.

“ASIC will continue to take action where we identify potential breaches of the law where the design and sale of financial products to consumers fails the litmus test of section 912A – efficiency, honesty and fairness,” she said.