Court orders $1.5 million Westpac penalty over add-on sales

The Federal Court has ordered Westpac Banking Corporation to pay a $1.5 million penalty for mis-selling consumer credit insurance to customers who had not agreed to buy the policies.

The penalty follows Australian Securities and Investments Commission (ASIC) action over credit card and flexi-loan repayment protection policies that were sold as add-on insurance products.

ASIC says Westpac issued consumer credit insurance policies to 141 customers who did not request the product from April 2015 to February 2017, sent a letter to each customer asserting the right to payment of premiums, and debited amounts.

“ASIC has identified consumer credit insurance to be a poor value product that leads to poor outcomes for consumers,” Deputy Chairman Sarah Court said.

“In this case, customers were charged for insurance policies they had not agreed to buy and therefore were unlikely to use. The sale of these products benefitted the bank and not the consumer.”

Federal Court Justice Anna Katzmann said the penalty reflected that the conduct, while serious, didn’t warrant a sum near the upper end of the scale.

“ASIC does not allege that Westpac’s admitted contraventions were deliberate or reckless, and the parties agreed that it was not systemic,” Justice Katzmann said. “Nevertheless, the conduct was not isolated, and it occurred over a prolonged period.”

Westpac says it has not sold consumer credit products since 2019 and has remediated affected customers.

“We apologise to the affected customers and remain focused on putting things right and simplifying our business,” a spokesman said. “Westpac and ASIC agreed a Statement of Agreed Facts and penalty amount of $1.5 million which the court has approved.”

ASIC says it has secured $270 million in remediation across the sector for consumers harmed by the sale of consumer credit insurance.

“The industry is now clearly on notice as to the consumer harm associated with the mis-selling of these products, and under the new penalty regime ASIC will be seeking significantly increased penalties for misconduct of this kind,” Ms Court said.