Criticize the CFPB if you must but the fact is they successfully cleansed numerous deceptive sales issues, not least of which included the sale of expensive credit card insurance. Unfortunately, it looks like Austrailian issuers did not pay attention and today, Commonwealth Bank of Australia faces a similar inquiry in their local market, as Austrailian Financial Review reports..
- Banks and insurance companies could face more than $1 billion in refunds as a result of mis-selling worthless add-on insurance policies such as credit card and tyre and rim cover, a consumer advocacy group has warned.
- The Consumer Action Law Centre warned this latent liability extended far beyond CBA, estimating the cost of worthless “junk” insurance policy refunds could cost the industry more than $1 billion.
- “Banks and insurers have refunded millions of dollars for junk insurance sold to Australians, but we suspect this is just scraping the surface,” Katherine Temple, Consumer Action’s director of policy and campaigns, told The Australian Financial Review.
- “We estimate that mis-selling of add-on insurance is likely to have cost Australians more than $1 billion over the last 10
The UK market seemed reactive to US inquiries.
- Ms Temple pointed out that endemic mis-selling of similar products in the UK, known as payment protection insurance or PPI, had cost banks up to £40 billion ($71 billion) in refunds.
- Mis-selling was so widespread in the UK it has spawned an industry of cold-callers who claim they can get customers PPI refunds – which have themselves been the subject of regulatory action.
…But, too little, too late, down under.
- The warning comes after Commonwealth Bank chief executive Matt Comyn told the Hayne royal commission on Tuesday his bank was in the process of repaying $45 million to around 150,000 customers who were mis-sold credit card and loan protection insurance.
- Mr Comyn admitted that an independent review by EY had found a further 374,000 customers may be owed remediation, meaning the bank could be facing tens of millions more in compensation payouts.
Even with the Aussie dollar set at .72 of the USD, a billion in refunds is still a ton of money!
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group