Around six million Aussies could be eligible for refunds of ‘junk insurance’ premiums paid on credit card and loan products. It could offer those eligible a much-needed cash boost amidst the ongoing cost of living crisis. Here’s how to check your eligibility.
Eligible customers include over one million Australians aged 60 and over, according to estimates by insurance claim company Claimo, which says its average refund is about $3,400.
“Although any loan prior to 2018 is worth investigating, we now know the 90s were notorious for attaching junk insurance to loans,” Claimo Director Nathan Mortlock said.
“Shockingly, most victims don’t even know they have paid for junk insurance, or could be owed a refund. Even if you had a loan with a respectable bank or lender, you should still check.
“Some insurances ‘just come with the loan or card’ and we don’t question it. People think these insurances are mandatory and they’re not.”
What is junk insurance?
Junk insurance refers to ‘add-on’ insurance products that provide little or no value to customers. A popular example is consumer credit insurance (CCI), which has been historically added-on to credit cards, personal loans and home loans.
CCI is usually marketed or sold to customers as a way for them to protect against default. But an ASIC review of CCI found these policies offer “very low value” to consumers. For credit card customers, ASIC found only 11 cents was paid for every $1 paid in CCI premiums. For all CCI products, only 19 cents was paid for every $1 paid in premiums.
ASIC’s review also revealed that consumers were sold CCI despite being ineligible to claim under their policy and sales staff were using “high-pressure selling and other unfair sales practices” when selling the insurance.
How to check your eligibility
Here’s how you can check if you are eligible for a refund:
- Look at your credit card statements and loan documents
- Look for the words ‘credit card insurance’, ‘consumer credit insurance’, ‘credit card payment protection’, ‘loan protection’ or ‘mortgage protection’
According to the Consumer Action Law Centre, you might be entitled to a refund for these premiums if, for example, the bank or other lender has sold it to you without your knowledge, or the insurance is not the right product for you.
How to get a refund
There are a few different ways you may be able to get a refund.
The Consumer Action Law Centre’s Demand A Refund is a free online tool that you can use. It can help you complain to your bank or lender and ask for your money back.
There are also class actions being brought against the big four banks. In 2020, law firm Slater and Gordon settled a $49.5 million class action against NAB on behalf of customers who were mis-sold CCI for credit cards and personal loans. Slater and Gordon is currently leading class actions against Commonwealth Bank, ANZ and Westpac.
Private firms like Claimo and Get My Refund take on claims individually and submit refund claims for you. Both companies work on a ‘no win, no fee’ model, but they take a cut of any refund you receive. Claimo currently takes 20%, while Get My Refund takes 30%.
ASIC has also taken the banks to court over credit card insurance. In April this year, for example, Westpac was ordered to pay a $1.5 million penalty for mis-selling CCI with its credit cards and loans to customers who had not agreed to buy insurance policies. ASIC says it continues to monitor ongoing remediation by the sector and it has now collected over $270 million in remediation for consumers.
Cover image source: Kamil Zajaczkowski/Shutterstock.com
This content was reviewed by Deputy Editor Sean Callery and Sub Editor Tom Letts as part of our fact-checking process.
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