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Facing the Challenges of Consumer Credit Insurance

Friday 9 April 2021

The latest commencement of proceedings against Westpac is just the latest chapter with the securities regulator on consumer credit insurance (CCI). 
 
“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.” Australian Securities and Investment Commission (ASIC) Deputy Chair Karen Chester said with the announcement of the regulators-initiated court proceedings against the members of the big four.”
 
“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.”
 
Back in 2011, ASIC published Report 256 Consumer Credit Insurance: Review of Sales Practices by Authorised Deposit-Taking institutions where 10 recommendations to avoid or reduce the 'mis-selling' of consumer credit insurance. 
 
Then in 2019, securities regulator published Report 622, Consumer Credit Insurance: Poor value products and harmful sales practices.
 
Eight years later design and sale of CCI products were still adversely affecting consumers.
 
At the time the securities regulator Commissioner Sean Hughes indicated that he was troubled by the findings in their report. 
 
“Lenders and insurers have had more than enough time to improve sales practices and provide better value for consumers. An inevitable consequence of these widespread failings and mis-selling practices will involve ASIC taking significant enforcement action against some of the entities named in our report.”
 

  • ASIC is undertaking investigations into the suspected misconduct of several entities involved in the CCI product market, with a view to enforcement action. The defendants to ASIC’s future action will be publicly identified at the time proceedings commence.
  • Due to the consumer harms, we have seen with the unsolicited outbound sale of CCI by telephone, we will shortly consult with all interested participants and consumers with a view to ASIC completely banning this practice.
  • 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.
  • We expect all CCI lenders to incorporate a four-day deferred sales model for all CCI products across all channels, not just those entities that subscribe to the Banking Code of Practice.