Westpac, ANZ, CBA share prices dip after class action for 'junk' insurance

The Westpac, ANZ and CBA share prices are down today after news reports the banks face a class-action lawsuit for their insurance products.

| More on:
Liar loan ASX banks banker with calculator tries to make sense of the Big Four banks, indicating tough time ahead for banking shares

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking GrpLtd (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA) share prices are slipping today after a news report the banks are facing a class-action lawsuit for their insurance products.

At market open, the ANZ share price is down 1.8% to $28.35, the Commonwealth Bank share price is flat at $87, while the Westpac share price is down 1.17% to $24.95.  

Big four banks under fire for consumer credit insurance

The big four banks are under fire for their consumer credit insurance (CCI), which is marketed as protecting consumers against late or missed payments.

In reality, the insurance pays out less than 10 cents for each dollar paid in premiums. This is compared to an average of 89 cents for every dollar paid in car insurance premiums.

During the banking royal commission, it was revealed Australia's big four banks were warned by executives and international banks of the dodgy practices more than 10 years ago, but refused to stop selling CCI to customers.

All four of Australia's major banks were hit with class actions over their CCI products, but National Australia Bank Ltd (ASX: NAB) already settled in 2019, paying out $49.5 million to almost 50,000 customers.

ASIC taking Westpac to court

Practice Group Leader at law firm Slater and Gordon, Andrew Paull, told the ABC that CCI had been sold to millions of Australians.

"It's known as junk insurance because for any normal person it's incredibly low value," he said.

"We're talking perhaps one in four Australian households that are being sold a complex and worthless financial product by one of the trusted big four banks."

Meanwhile, the Australian Securities and Investments Commission (ASIC) is taking Westpac to court over its CCI deals, alleging it mis-sold CCI to 400 customers who hadn't agreed to buy it through credit card bundle deals. ASIC is seeking a fine as punishment.

In a statement, Westpac said it was "carefully considering these claims and is committed to working constructively with ASIC through the court process".

Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Bank Shares

A corporate female wearing glasses looks intently at a virtual reality screen with shapes and lights representing Block shares going up today
Bank Shares

Are Westpac shares a buy following the bank's big tech update?

Is now a good time to buy the banking giant's shares? Let's find out.

Read more »

Different Australian dollar notes in the palm of two hands, symbolising dividends.
Bank Shares

Own CBA shares? It's payday for you!

A dividend is heading to CBA shareholders’ bank accounts.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Are CBA shares really worth $120?

It has been a good year for ASX bank shareholders.

Read more »

a group of people sit around a computer in an office environment.
Bank Shares

Westpac shares push higher on $9.8b technology simplification plan

Westpac plans to spend big on technology to close the gap on its rivals.

Read more »

A worried woman looks at her phone and laptop, seeking ways to tighten her belt against inflation.
Economy

NAB boss issues dire prediction for Aussie economy

NAB’s CEO has issued a stark warning on the outlook for Australia’s economic growth.

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Bank Shares

Own CBA shares? Here's the tech stock the banking giant just invested in

CBA has made an interesting investment. Here's what you need to know.

Read more »

A woman gives two fist pumps with a big smile as she learns of her windfall, sitting at her desk.
Bank Shares

ANZ shares charge higher on $57.5 million class action settlement news

ANZ shares have continued their positive run on Monday.

Read more »

Two people comparing and analysing material.
Bank Shares

Better buy: CBA or Westpac stock?

Which ASX bank share is a better buy?

Read more »