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Law firm Slater and Gordon is investigating potential class actions against Australian banks on behalf of consumers who have been sold millions of dollars in "worthless" or "junk" credit card insurance.
"We have found substantial evidence which suggests that a large number of people have paid tens of millions of dollars for this insurance, despite the fact they were ineligible to claim some or all of the available benefits," Slater and Gordon says."The level of consumer awareness also appears to be incredibly low, with many people either unaware they have insurance or labouring under the misapprehension that it is a requirement for obtaining a credit card."
Consumer credit insurance provides coverage if a person becomes unable to meet their repayments, usually due to death, disablement, serious illness or involuntary unemployment.
It is often sold alongside financial products, including credit cards and other loans, and is usually calculated as a percentage of the outstanding balance.
The big four Australian banks charge anywhere between $0.45 and $0.79 per $100 owing per month for consumer credit card insurance.
Slater and Gordon says this means a credit card holder with the national average balance of $4,200 would be paying anywhere between $225 and $400 per year for consumer credit insurance.
"Although it often sounds cheap, it is actually very expensive when compared to more traditional insurance products, like life insurance and income protection insurance."
Commonwealth Bank (ASX: CBA) has already admitted it sold loan and credit card insurance to customers who were not eligible to make claims.
Last week, the bank said it will refund $16 million to 140,000 loan and mortgage insurance customers after it found these people would not be eligible to make a claim.
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