CGU Insurance and Accident and Health International have agreed to refund consumers over $2 million in payday loan consumer credit insurance premiums and fees, following an ASIC investigation which found these premiums “useless” and “unfair”.
The insurance was sold by The Cash Store – which is now in liquidation – alongside payday loans to consumers. The agreement to refund consumers follows earlier court action by ASIC against The Cash Store, in which the Federal Court found that The Cash Store had acted unconscionably in selling a payday loan consumer credit insurance product (CCI product).
The CCI product covered consumers against the risk of becoming unemployed, sick or dying during the period of the payday loans, which could be as short as one day, and was usually around two weeks.
ASIC's court action against The Cash Store was in respect of its conduct between August 2010 and March 2012. According to the regulator, The Cash Store sold the CCI product to over 180,000 customers, costing them a total of $2,278,404. However, only 43 claims were paid to consumers, totalling only $25,118.
“ASIC took action because we were concerned about the unfair sale of the payday insurance when it was highly unlikely that consumers would be able to make a claim. We therefore welcome CGU and AHI's agreement to refund more than $2 million to these consumers,” ASIC deputy chair, Peter Kell said.
To minimise the risk of this type of conduct occurring again, CGU and AHI have also agreed to review claims it denied where the consumer did not meet the eligibility requirements and appoint an independent external firm to review its supervision of third parties.