The Federal Court has ordered Westpac Banking Corporation pay a $1.5 million penalty for mis-selling consumer credit insurance with its credit cards and Flexi Loans to customers who had not agreed to buy insurance policies.
From April to July 2015, Westpac issued consumer credit insurance policies to 141 customers who did not request the product. Westpac then sent a letter to each customer asserting the right to payment of insurance premiums and debited payment of these amounts from the customer’s credit card or facility. The Court found Westpac did not have the right to these payments and customers were not liable to pay them.
ASIC Deputy Chair Sarah Court said, ‘ASIC has identified consumer credit insurance to be a poor value product that leads to poor outcomes for consumers. 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.
‘ASIC has secured $270 million in remediation across the sector for consumers harmed by the sale of consumer credit insurance. 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.’
Justice Katzmann said ‘I am persuaded that the agreed penalty is an appropriate one’ and in reaching this decision considered the contraventions were not deliberate, reckless or systemic, although noted there was a lack of care. Justice Katzmann also noted Westpac’s conduct, though serious, did not warrant a penalty near the upper end of the scale.
ASIC’s action relates to Westpac’s Credit Card Repayment Protection and Flexi-Loan Repayment Protection policies which were add-on insurance products sold with credit cards and lines of credit.
Westpac admitted that it had:
- asserted a right to payment for the consumer credit insurance premiums which customers were not liable to pay in contravention of s12DM of the ASIC Act; and
- failed to comply with financial services laws under s912A(1)(c) of the ASIC Act.
