ASIC commences court proceedings against Westpac

The Australian Securities and Investment Commission (ASIC) has commenced civil penalty proceedings in the Federal Court against Westpac Banking Corporation (Westpac), alleging it mis-sold consumer credit insurance (CCI) with credit cards, and other credit facilities, to customers who had not agreed to buy the policies.

The regulator’s action relates to Westpac’s Credit Card Repayment Protection and Flexi-Loan Repayment Protection policies which are add-on insurance products sold with credit cards and lines of credit.

ASIC Deputy Chair Karen Chester said, “ASIC’s deep dive investigations in late 2018 and into 2019 found lenders had disappointingly not changed policies and conduct to stem harms from the design and sale of CCI. As a result, we’ve commenced civil proceedings against Westpac.”

“In addition to our enforcement action, ASIC has secured over $250 million of remediation for the consumers harmed by the practices of the offending lenders. The CCI remediation program covers 11 major banks and other lenders and has returned on average over $430 to over 580,000 consumers. Our trifecta of regulatory action – our 2019 report, targeted investigations to initiate enforcement action and remediation – collectively brings transparency, deterrence and rectification to CCI misconduct.”

ASIC alleges that from 7 April 2015 to 28 July 2015, Westpac:

• made false or misleading representations that customers had agreed to acquire, were liable to pay for and that Westpac had a right to charge for, CCI;
• asserted a right to payment for the CCI premiums which customers were not liable to pay;
• failed to ensure that its financial services were provided efficiently, honestly and fairly when it supplied CCI to customers who had not agreed to acquire CCI and debited premiums from those customers’ accounts; and
• failed to comply with financial services laws, being the ASIC Act.

ASIC is seeking declarations and pecuniary penalties from the Federal Court. The date for the first case management hearing is yet to be scheduled by the Court.

Chester added, “ASIC will continue to take action where we identify potential breaches of the law where the design and sale of financial products to consumers fails the litmus test of section 912A – efficiency, honesty and fairness.”

This action forms part of ASIC’s priority to address consumer harms in insurance. It follows a detailed ASIC review of the sale of CCI by 11 major banks and other lenders. ASIC’s report, Consumer credit insurance: Poor value products and harmful sales practices, published in July 2019, revealed that the design and sale of CCI had consistently failed consumers. The company regulator found that CCI was poor value, CCI sales practices and product design caused consumer harm and consumers were being incorrectly charged for CCI.