CBA ditches Credit Card Plus and Personal Loan Protection Products
CommBank will also refund approximately $16 million to impacted customers.
Following a review of its products, the Commonwealth Bank has announced that it will put an end to the sale of its current Credit Card Plus (CCP) and Personal Loan Protection (PLP) products from today.
These products are types of Consumer Credit Insurance (CCI), which is a form of additional insurance traditionally sold with credit cards, personal loans, home loans and car loans. It is designed to protect credit borrowers in the case they’re unable to meet repayments as a result of becoming sick, injured or involuntarily unemployed.
However, many banks have been under fire recently for offering applicants unnecessary or unsuitable CCI policies that they’re ineligible to take advantage of. The Commonwealth Bank is one of these institutions, so removing these products from the market is one way the bank is probably trying to get out of hot water.
“We have concerns that some customers who have been sold these products may not have been eligible to receive all of the employment-related benefits. We have also sought consumer groups’ views on our concerns and they agree,” said CommBank’s group executive of retail banking services Matt Comyn.
The process required to remove the product from the market will begin immediately and will be completed by 30 June 2018. Existing CCP and LLP customers will continue to receive cover under their existing policies. CommBank will also continue to offer its Home Loan Protection products to new and existing customers.
CommBank will contact customers who could be affected and has set aside approximately $16 million for refunds, including interest, to an estimated 140,000 customers covered by PLP and Home Loan Protection.
This decision to remove these two insurance products from the market comes a few months after ASIC announced an investigation into CCI to prevent unethical outcomes for customers. For example, in August 2017, finder reported that CommBank would refund $10 million to more than 65,000 customers after mis-selling consumer credit card insurance. Following an ASIC investigation, it was revealed that the bank sold Credit Card Plus insurance to 65,000 credit card customers who were unlikely to meet the employment criteria and would be unable to claim the insurance.
In addition to the ASIC investigation, the Australian Banking Association (ABA) also revised the Code of Banking Practice to address some of these issues with CCI. So we can predict that more institutions will continue to change or drop their CCI products in the coming months.
- Why “no interest” credit cards are really “monthly fee” cards
- CBA announces zero interest credit card CommBank Neo: How does it compare?
- NAB StraightUp: How credit cards are changing in a buy now pay later world
- 8 personal finance habits to get more out of life
- How to make the most of American Express Shop Small in 2020