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CBA share price lower on Slater & Gordon class action news

Commonwealth bank

The Commonwealth Bank of Australia (ASX: CBA) share price is trading lower on Wednesday.

In afternoon trade the banking giant’s shares are down 0.65% to $71.73.

Why is the CBA share price in the red?

This decline appears to have been caused by a spot of profit taking in the banking sector today after some stellar gains over the last three weeks.

Prior to today, the CBA share price was up 21% over the previous three weeks.

This actually made it the laggard in the group, with the other big four banks recording even stronger gains over the same period. Though, given how much harder their shares have fallen during the pandemic, this isn’t particularly surprising.

Is anything else weighing on CBA’s shares?

Also potentially weighing on the bank’s shares today was news that Slater & Gordon Limited (ASX: SGH) has filed a class action in the Federal Court.

This class action relates to consumer credit insurance (CCI) for credit cards and personal loans that was sold between 1 January 2010 and 7 March 2018.

The bank has advised that it is reviewing the claim and will update the market when appropriate.

What is the class action?

This class action is similar to one that Slater & Gordon filed against National Australia Bank Ltd (ASX: NAB) for the sale of CCI. That case was recently settled for $49.5 million.

Slater & Gordon commented: “The CBA class action is part of a series of cases following the Banking Royal Commission, which heard that banks were using pressure tactics to sell unnecessary CCI products to customers who were ineligible to claim under the policies. It is the fourth class action Slater and Gordon have issued in relation to CCI products.”

The law firm notes that CBA previously identified that many customers had been sold policies that they were ineligible to claim upon, making them worthless. And while the bank provided refunds to some of their customers, Slater and Gordon believes the remediation program did not adequately compensate customers.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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