Class actions against Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) were filed in the Federal Court this morning and will be served on the banks today. The class actions accuse ANZ and Westpac of selling 'junk insurance' to vulnerable customers.
Class actions on consumer credit insurance
As reported by Lawyers Weekly, the actions were filed by Slater & Gordon Limited (ASX: SGH) and relate to consumer credit insurance added to credit cards and loans by ANZ and Westpac.
According to Slater & Gordon, the insurance policies provided little or no benefit to the banks' customers but generated hundreds of millions of dollars in revenue for the banks and insurers. It is also alleged that the insurance was added to customers' loans and credit cards without their consent, or without them being told it was optional.
Unconscionable conduct
The latest class actions come only months after National Australia Bank Ltd. (ASX: NAB) settled a similar case for $49.5 million. The new class actions accuse the banks of engaging in unconscionable conduct and misleading and deceptive conduct, providing inappropriate advice, and unjust enrichment.
Slater & Gordon Practice Group Leader Andrew Paull said, "for too long banks have abused their power by selling junk insurance products, adding thousands to their customers' credit card bills or personal loan repayments while providing little or no benefits to the customer."
ASIC ban
Both banks stopped selling this insurance last year and the Australian Securities and Investments Commission (ASIC) has now outright banned the practice of cold calling potential customers. Many people who were sold the insurance policies had disabilities, were unemployed, or were critically ill, and therefore not eligible to claim on the policies. "Others were led to believe the insurance was free, or mandatory," Paull said, "neither was the case," he added.
Hefty profit margins
As reported by Lawyers Weekly, the banks enjoyed fat profit margins on these products with ANZ paying out claims totalling just 6.9 cents for every dollar they collected in credit card insurance premiums. By comparison, motor vehicle insurance pays out approximately 85 cents for every dollar of premiums.
Eligibility for class action
Those who purchased the relevant types of insurance since 2010 may be included in the class action. The relevant insurance types are ANZ Credit Card Insurance, ANZ Personal Loan Protection, Westpac Credit Card Repayment Protection, Westpac Flexi Loan Repayment Protection, and Westpac Personal Loan Protection.
