SYDNEY (Reuters) – Australia’s corporate regulator threatened on Thursday to prosecute some of the country’s largest banks over their sales earlier this decade of consumer insurance products that it said had harmed customers.
FILE PHOTO: The logo for the Commonwealth Bank of Australia adorns their head office in central Sydney, Australia, October 12, 2017. REUTERS/David Gray/File Photo
The Australian Securities and Investments Commission (ASIC) said in a report that consumer credit insurance products, which cover credit card debts or loans when a person loses their job, falls sick or gets injured, had “consistently failed consumers”.
It said a seven-year review of the sales practices and products of Commonwealth Bank of Australia (CBA.AX), Citigroup (C.N), Australia and New Zealand Banking Group (ANZ.AX) and eight other lenders had showed they “caused consumers harm” and were “extremely poor value for money”.
“We are deeply troubled by the findings in our report, and the stories they tell of unfair practices occurring within Australia’s largest and most well-known financial institutions,” ASIC Commissioner Sean Hughes said in a statement.
“An inevitable consequence of these widespread failings and mis-selling practices will involve ASIC taking significant enforcement action against some of the entities named in our report,” Hughes added.
The regulator’s report and threat of action follows over A$100 million ($69.58 million) in remediation made to over 300,000 consumers and revelations at a powerful inquiry that banks were aware of the problems for years but continued selling the products.
Representatives from CBA, ANZ and Citi did not immediately respond to emails seeking comment.
ASIC said its investigation, for the period 2011 to 2018, found insurance sold to cover credit card debts had paid only 11 cents for every dollar that consumers spent in premiums.
It said the report found that the products were sold to people that were ineligible to claim their policy, for example, due to unemployment. It also found that telephone sales staff used high-pressure selling tactics, and that consumers were given poor personal advice to buy the policies.
ASIC threatened to intervene to get the products banned and said it would investigate “suspected misconduct of several entities involved in the CCI product market” and would take public action against the culprits.
Reporting by Paulina Duran; Editing by Muralikumar Anantharaman
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