What is this scandal about?

You might have seen recent TV news coverage or read about it online or in the press. However, if you haven’t, the shocking scandal is that banks and lenders often sold customers CCI – without their knowledge or were even mis-sold it and could be owed $1000’s in compensation!

Lenders have been blasted for ‘consistently failing’ consumers on CCI. The design and sale of Consumer Credit Insurance has “consistently failed consumers” ASIC has said, as it announces enforcement action against several banks and lenders, calls for customer remediation, and warns CCI vendors to adhere to new rules or cease selling it altogether.

ASIC has previously raised concerns about CCI and launched a review of the sale of CCI by 11 lenders for the period 2011 to 2018 in December 2017

The results of this review states:

Poor value products and harmful sales practices, in which ASIC found that CCI sales practices and product design are “still delivering poor outcomes for consumers” and, in some cases, resulting in “consumer harm”.

In ASIC’s new report, the regulator warned that CCI products are typically of “very low value” and have been sold and promoted in an “unfair manner”, the financial services regulator said.

Why is credit protection unfair?

According to ASIC, the Australian Securities and Investments Commission there are big problems with the pay-outs if your claim is approved!

The money is not paid to you – it’s paid directly to the lender.
Some payments are made in instalments which often stop after a set period of time – you’ll have to make your own repayments after that.
Many policies don’t cover you for the full amount of your outstanding debt. For example, consumer credit insurance policies sold with credit cards usually only pay out a percentage of the outstanding debt.

Other problems:

It’s very expensive – expect to pay over $2000.
It might be useless to you – for example, if you’re unemployed, working part-time, as a casual or are self-employed, the unemployment insurance may not cover you. If you have a pre-existing condition, you may not be covered for disablement or death caused by that condition.
It is very profitable for salespeople who usually receive a 20% commission of the premium you pay.
Insurers pay only 23 cents in the dollar in claims compared to the premiums collected – that’s less than half of what’s paid out on home insurance.