Consumer entitled to refund for 'mis-sold' consumer credit policy

A complainant who sought a refund for premiums he paid for a Consumer Credit Insurance (CCI) policy has won his dispute after it was found there were “elements of misrepresentation”.

The man said the policy had been automatically added after he purchased a vehicle at a dealership in November 2007.

He said he was not told the policy was optional or given any information relating to it, and alleged the salesperson said the insurance was a “normal part of a car loan application process”.

The insured said that he felt under pressure to sign the contract quickly. He said that he would not have agreed to purchase it if he had been aware of the costs involved.

The complainant said that the loan agent provided him with a pre-filled application form, which asked him to certify answers that had not been in his handwriting.

Virginia Surety Company, the insurer, said the policyholder had signed the contract with the understanding that he was purchasing the CCI policy. It said he had been provided with a policy schedule and PDS during the sale.

The Australian Financial Complaints Authority (AFCA) said it was “important to look beyond the mere fact the complainant signed documents”.

It said findings from the Hayne royal commission and Australian Securities and Investments Commission noted an “environment in which add-on insurances are normally sold are open to inappropriate selling practices”.

“Often a financial firm will rely on the fact the complainant signed documents purporting to agree to the add-on insurance policy and acknowledge receiving relevant documents,” AFCA said.

“Whilst legal principles say a person is normally bound by what they sign, AFCA does not accept this is determinative as to what is fair in all the circumstances.”

It noted policy documents that showed a listed amount of $3973 for the CCI policy included in the overall contract.

AFCA said that this part of the contract appeared to have been pre-filled and that the section which included the costs did not state that the insurance was not compulsory. It acknowledged that the policy optionality had been mentioned on the next page.

It also cast doubts on whether the complainant had been provided with the policy’s PDS when signing the contract and said that if he had been, he had not been provided ample time to properly review it and understand that it was an optional product.

AFCA observed that the insurer made no effort to gather information about the policy sale from the selling agent, despite holding an ongoing relationship with them.

“Based on the information provided, I consider, on balance, there were elements of misrepresentation, unfair sales practices, and inadequate disclosure of important terms,” AFCA said.

“The information shows the policy was presented and its application was completed in one day at the dealership.

“The CCI policy was also already pre-filled into the contract for the complainant to sign on the same day, without adequate disclosure of its optionality.”

The ruling required the insurer to repay the complainant for the premium costs as adjusted to inflationary losses based on the Australia Bureau of Statistics consumer price index.

Click here for the ruling.