Australia’s biggest bank repeatedly tried to mislead the corporate watchdog over the extent of its problems selling junk insurance to students, pensioners and the unemployed, the banking royal commission was told yesterday.
The Commonwealth Bank made multiple attempts to underplay the number of customers affected by sales of the junk insurance policies before finally agreeing last year to repay about 64,000 customers sold credit card insurance they would not be able to use.
The insurance covers repayments if clients lost their job, but it was sold to students, pensioners and the unemployed. They were charged 55¢ a month for every $100 owing on the card — or $16.50 for an average $3000 credit card debt — despite the bank knowing they could not make a claim as they had no job to lose.
The Australian Securities and Investments Commission identified the problem in 2011 but senior counsel assisting the royal commission, Rowena Orr, said the bank kept selling the products for four years, until an internal audit identified the breach. Ms Orr said the bank in a 2015 review identified 64,000 victims of the junk credit card insurance, but it consistently underplayed the issue when it self-reported the problem to ASIC.
Ms Orr said the bank initially told ASIC of about 28,000 customers with current policies, not those who had dropped the cover, and had to be “pushed and pushed and pushed” before finally agreeing to reimburse everyone who had bought junk cover.
The royal commission was told bank staff kept selling separate lines of insurance covering personal and home loans, despite the bank knowing similar problems existed with those products from 2015.
While it modified its sales scripts to try to exclude those without jobs that year, the Commonwealth did not tell ASIC it had broken the rules for another two years.
Even then it only admitted the breach after a customer sold the dud insurance complained to regulators.
The bank’s executive general manager of retail products, Clive van Horen, denied the bank had tried to “sweep aside” the problems, but admitted it had failed in its obligation to disclose its breaches of consumer credit rules “honestly, efficiently and fairly”.
“We should have done it earlier. I’m not going to deny that for one second,” he said.
Commissioner Kenneth Hayne queried whether the bank’s response involved a “series of unfortunate events”, or was a pattern of behaviour.
“The alternative is whether it is open to me to conclude that CBA swept the problem aside in the hope it would go away,” Mr Hayne said.
Mr van Horen said the bank had erred by trying to deal with its credit card insurance problems before looking at issues with other products.
“In all of my engagement on this matter, and everything I’ve observed from investigating, CBA had no intention to sweep the matter aside or pretend it didn’t exist,” he said.