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Tech & Science NAB to pay compensation to 400,000 customers sold junk insurance

08:31  27 november  2019
08:31  27 november  2019 Source:   abc.net.au

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The National Australia Bank ( NAB ) has agreed to pay compensation to 400 , 000 customers who were sold junk credit card and personal loan insurance . It is understood to be the first settlement of a class action taken as a result of the banking royal commission. The amount to be paid to each

The National Australia Bank ( NAB ) has agreed to pay compensation to 400 , 000 customers who were sold junk credit card and personal loan insurance .

The National Australia Bank (NAB) has agreed to pay $49.5 million in compensation to tens of thousands of customers who were sold junk credit card and personal loan insurance.

It is understood to be the first settlement of a class action taken as a result of the banking royal commission.

The amount to be paid to each customer is still to be worked out, but the court hopes they will be notified by Christmas if they will receive a payout.

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The National Australia Bank ( NAB ) has agreed to pay compensation to 400 , 000 customers who were sold junk credit card and personal loan insurance .

The National Australia Bank ( NAB ) has agreed to pay compensation to 400 , 000 customers who were sold junk credit card and personal loan insurance .

Compensation will not be paid to customers until some time after the settlement is formally approved at a hearing on January 30.

The class action, taken by law firm Slater and Gordon in the Federal Court, alleged NAB and subsidiary MLC engaged in unconscionable conduct in selling consumer credit insurance (CCI) to customers.

They included pensioners, casual workers, and unemployed and critically ill people who were ineligible to claim or unlikely to benefit from the policies.

It was also alleged NAB engaged in misleading and deceptive conduct when selling the insurance.Slater and Gordon practice group leader Andrew Paull said the policies were "next to worthless" to many of the people they were sold to.

NAB signage. © AAP Image/Joel Carrett NAB signage. He said the settlement was the largest amount that had ever been paid by a big-four bank to its customers as a result of a class action.

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The National Australia Bank ( NAB ) has agreed to pay compensation to 400 , 000 customers who were sold junk credit card and personal loan insurance .

The National Australia Bank ( NAB ) has agreed to pay compensation to 400 , 000 customers who were sold junk credit card and personal loan insurance .

Mr Paull said the amount of compensation individual customers could expect to receive would depend on how much they paid in premiums, which ranged from hundreds to more than a thousand dollars a year.

"Those amounts are very significant for the types of people who are participating in this action," he said.

"For a person who is unemployed, for a person living on the disability pension, a few hundred dollars a year or a thousand dollars a year makes a very big difference."

He said none of the big-four banks continued to sell the kinds of policies that were the target of the action.

It is estimated about 400,000 people were sold the insurances policies under scrutiny, but the compensation payments will be limited to pensioners, students, and the unemployed.

Gerard Brody from the Consumer Action Law Centre (CALC) said it would be wrong if the class action excluded other customers who bought policies they would not have been able to benefit from.

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The National Australia Bank ( NAB ) has agreed to pay compensation to 400 , 000 customers who were sold junk credit card and personal loan insurance .

The National Australia Bank ( NAB ) has agreed to pay compensation to 400 , 000 customers who were sold junk credit card and personal loan insurance .

He said banks and insurers had already reimbursed customers $13 million through the CALC's "demand a refund" website.

Mr Brody said on average the refund to people sold junk insurance was $1,300.

NAB says settlement 'the right thing to do'

The bank settled the action without making any admission of wrongdoing.

In a statement, NAB chief legal and commercial counsel Sharon Cook said the settlement was "the right thing to do for our customers and shareholders".

"As we have said, we can only move forward if we deal with the past, so that we can earn trust among customers and the broader community and grow confidence in the future of NAB," the statement said.

"It is important to note NAB no longer sells CCI products through any of its banking channels, and has implemented a remediation program for CCI customers."

Earlier this year, the corporate regulator gave a scathing assessment of CCI policies offered in Australia, finding they were "extremely poor value for money".

On average, customers only received 11 cents for every dollar spent on CCI premiums linked to their credit cards, the Australian Securities and Investments Commission (ASIC) revealed in its July report.

CCI policies offer to provide payouts to help cover loan or credit card repayments if someone is sick, injured or loses their job and cannot meet the minimum repayments.

The regulator scrutinised all CCI products — including mortgages and personal loans — offered by Australia's 11 biggest banks and lenders, including Westpac, ANZ, NAB and the Commonwealth Bank/Bankwest.

Last November, the selling of junk CCI came under sharp criticism at the banking royal commission — in particular, cold call selling of the products.

Last year, the Commonwealth Bank announced it would pay back $16 million to customers who purchased such policies.

In 2017, following action from ASIC, the bank was forced to pay about $10 million over inappropriately sold consumer credit insurance.

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