Westpac to face court over ‘misleading’ CCI

The Australian Securities & Investments Commission (ASIC) has commenced civil penalty proceedings in the Federal Court against Westpac Banking Corp, over allegations that it mis-sold consumer credit insurance (CCI) with some credit cards and lines of credit in 2015.

Westpac has not sold CCI products since 2019, after an ASIC investigation warned that the design and sale of consumer credit insurance (CCI) had “consistently failed consumers” and stated that CCI was poor value, its sales practices and product design caused consumer harm and consumers were being incorrectly charged for CCI.

There has also been a ban on unsolicited “cold call” telephone sales of CCI and direct life insurance from 13 January 2020.

Details of the allegations

The case focuses on add-on CCI policies that were put in place on Westpac’s Credit Card Repayment Protection and Flexi-Loan Repayment Protection policies.

ASIC alleges that between 7 April 2015 to 28 July 2015, Westpac charged CCI to customers who had not requested it.

While the regulator said that the total number of affected customers is unknown, the proceedings are being brought in respect of approximately 384 customers who reportedly had not agreed to acquire CCI and were therefore not liable to pay for it, but who were nonetheless debited for CCI premiums.

As such, the regulator is alleging that each time Westpac supplied a CCI without the customer’s agreement, it failed to do all things necessary to ensure that the financial services covered by its AFSL were provided “efficiently, honestly and fairly”, contravening section 912A(1)(a) of the Corporations Act 2001.

It also alleges that, because the CCI was supplied to the affected customers without a request, the CCI was an unsolicited financial product and/or Westpac’s supply of it was an unsolicited financial service, breaching the ASIC Act.

Overall, ASIC alleges that Westpac:

• made false or misleading representations that customers had agreed to acquire, were liable to pay for, and that Westpac had a right to charge for, CCI;
• asserted a right to payment for the CCI premiums which customers were not liable to pay;
• failed to ensure that its financial services were provided efficiently, honestly and fairly when it supplied CCI to customers who had not agreed to acquire CCI and debited premiums from those customers’ accounts; and
• failed to comply with financial services laws (i.e. the ASIC Act).

ASIC is seeking declarations and pecuniary penalties from the Federal Court.

ASIC’s deputy chair, Karen Chester, commented: “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.

“As a result, we’ve commenced civil proceedings against Westpac.”

She added that ASIC has so far secured over $250 million of remediation for the consumers harmed by the practices of the 11 lenders covered in the report, returning – on average – over $430 to over 580,000 consumers. Nearly $100 million of this has been repaid in the last year (with ASIC announcing in May 2020 that it had facilitated $160 million in remediation payments).

“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,” Ms Chester said.

She added: “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.”

Westpac has acknowledged the proceedings, emphasising that the bank has not sold CCI products since 2019.

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

The date for the first case management hearing is yet to be scheduled by the court.

Since ASIC’s 2019 report into CCI, many lenders have scrapped their CCI insurance products and refunded customers.

Moreover, several class actions were brought against the banks in relation to the mis-selling of loan and credit card insurance, most of which have been settled.

[Related: CCI failings to cost lenders $160m]