Commonwealth Bank faces criminal charges over dodgy insurance

Commonwealth Bank posted record profits of over $10 billion.

Commonwealth Bank posted record profits of over $10 billion. Photo: AAP

Commonwealth Bank is facing 30 criminal charges for selling dodgy insurance to credit card and home loan customers between 2011 and 2015.

Corporate regulator ASIC filed the charges on Thursday, alleging CBA made false and misleading claims to customers when selling its now discontinued CreditCard Plus and Loan Protection insurance policies.

The claims relate to revelations from the banking and financial services royal commission in 2019, where it was revealed CBA sold an estimated 204,000 customers junk insurance products for which they were not eligible.

The bank, which says it will plead guilty to the charges, faces a maximum fine of $51 million for the breaches – 0.5 per cent of its 2020-21 profit.

ASIC will allege that CBA sold insurance policies to customers who were ineligible to make claims because they were unemployed at the time.

“CBA made false or misleading representations to customers that the insurance policies had uses or benefits to those customers when part or all the benefits were not available,” the regulator said on Thursday.

Testimony to the 2019 royal commission revealed 64,000 customers had paid about $10 million for credit card insurance for which they were not eligible.

At one point during the hearings, CBA estimated it sold junk home loan insurance to about 140,000 customers.

The royal commission concluded the bank also repeatedly failed to fix problems with its insurance products once it became aware of them.

It found the bank underreported the problem to the regulator, claiming only 27,000 customers were affected by its junk credit card insurance when the number was almost three times higher.

“This was conduct that falls below community standards and expectations,” the royal commission concluded.

The latest ASIC charges relate to far fewer customers, with just 165 people covered under the 30 offences levied at Commonwealth Bank.

In a statement on Thursday, a spokesperson for the bank apologised to customers affected by the junk insurance deals.

“In 2011 the wrong decision was made to remove qualifying questions about the employment status of a customer from some mandatory sales scripts,” a spokesperson for the bank said in a statement.

“Those questions would have disclosed at the point of sale whether the customer would be eligible for certain benefits under those policies.”

The ASIC charges come just a day after the regulator laid more than 60 criminal charges on ME Bank under alleged breaches of the same laws.

That case relates to misleading and false claims ME Bank allegedly made about interest rates charged on its home loan products. 

Stay informed, daily
A FREE subscription to The New Daily arrives every morning and evening.
The New Daily is a trusted source of national news and information and is provided free for all Australians. Read our editorial charter.
Copyright © 2024 The New Daily.
All rights reserved.