MORE than 65,000 Commonwealth Bank customers will be refunded close to $10 million after they were sold unsuitable consumer credit insurance (CCI).
The insurance add-on is usually sold with credit cards and loans to help borrowers meet their repayments if they become sick, injured or involuntarily unemployed.
But the Australian Securities and Investment Commission (ASIC) found many customers sold CreditCardPlus insurance between 2011 and 2015 were either unemployed or students and therefore not eligible to claim the cover provided.
ASIC deputy chair Peter Kell said it was unacceptable that customers were sold insurance that did not meet their needs.
"One of ASIC's priorities is addressing poor consumer outcomes associated with add-on insurance, including CCI," he said.
"Consumers should not be sold products that provide little or no benefit, and banks should have processes in place that ensure this."
The bank is also refunding close to $586,000 in premiums to around 10,000 customers after it over-insured them for Home Loan Protection CCI taken out between 2007 and 2015.
These customers were charged premiums based on the loan amount they applied for rather than the amount they actually borrowed.
In some cases, cover was also provided and paid for before the loan was drawn down.
Both issues were discovered by the bank and its insurance arm CommInsure and reported to ASIC.
The bank will contact affected customers shortly and will continue its review to ensure all affected customers are identified and remediated.
"We respect ASIC and will always work with the regulator to assist it with any inquiries it may have in relation to our business," a Commonwealth Bank spokesperson said.
In 2015 Westpac refunded more than 10,000 customers for similar conduct.
