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.
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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".
