Banks ban on the spot credit insurance
Australian banks have agreed to stop selling on the spot add-on insurance to customers applying for credit cards, following an audit by the corporate regulator.
The Australian Securities and Investments Commission began an investigation into eight banks late last year following action taken in the United States against Wells Fargo, which opened two million illegal customer accounts.
The watchdog said there were no signs of unlawful conduct detected within the Australian banks, which include the big four, but it found improvements should be made to the sale of consumer credit insurance (CCI).
"CCI has long been associated with poor consumer outcomes in Australia and overseas, including consumers being unaware that they have purchased CCI and being ineligible to make a claim," ASIC said on Tuesday.
The insurance is currently sold with credit cards, personal, home and car loans, and is promoted to borrowers to help them meet their repayments if they lose their job, get sick or injured, or die.
ASIC said the banks, which also include Bank of Queensland, Citibank, HSBC and Suncorp, had committed to delaying and separating the sale of the add-on insurance from credit card or loan applications.
The changes will take effect in the first half of 2018 and mean bank staff will have to wait at least four days to sell CCI after a credit card account is opened.
"Consumers should be confident that when they sign up for consumer credit insurance, they know what it is and that it suits their needs," ASIC deputy chairman Peter Kell said.
The Australian Bankers' Association said staff will also have to provide more information about the insurance and take a separate record that the customer has consented to have the product.
"Currently, there are different procedures in place, so this is intended to make sure banks adopt more consistent practices," ABA chief executive Anna Bligh said.
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