368,000 Westpac customers could be eligible for a refund after buying junk insurance

Westpac CEO Peter King. (Sam Mooy, Getty Images)
  • A class action is facing up against Westpac on behalf of 368,000 of its customers.
  • It seeks to reimburse customers who may have bought junk insurance polices that were of little or no value or use to them.
  • The Slater and Gordon action alleges that “many people were led to believe that the insurance was compulsory or free, while others didn’t even know they had been sold it.”
  • Visit Business Insider Australia’s homepage for more stories.

Hundreds of thousands of Australians will today receive a letter from the Federal Court informing them they could be in line for a refund from their bank.

Westpac, Australia’s second-largest bank, faces a Slater and Gordon class action involving up to 368,000 of its customers over the sale of ‘junk insurance’.

“The Banking Royal Commission exposed the blatant misbehaviour of the big banks, ripping off unsuspecting and trusting customers; this class action will hopefully get back the money taken from them when pressured into buying worthless products,” Slater and Gordon group leader Andrew Paull said.

Customers were sold junk credit card and personal loan insurance, or in other words policies that were of little or no value to them. In many instances, the buyer wouldn’t have been able to claim against the policy at all.

Westpac was hardly alone. The royal commission uncovered a multitude of cases where such policies were hawked to the sick, the disabled and the unemployed.

In one particularly harrowing case, a hearing heard how a 26-year-old man with Down syndrome had been sold junk policies totalling more than $100,000 by Freedom Insurance. The insurer later failed to cancel them at the behest of his father.

But while those hearings have long since concluded, remediation efforts by all the banks remain ongoing.

In this instance, Slater and Gordon’s class action, launched in February, “alleges that many people were led to believe that the insurance was compulsory or free, while others didn’t even know they had been sold it.”

In a response, a Westpac spokesperson said that the bank is defending itself against the action but, “as the matter is before the courts we will not be commenting further”.

If successful, the case could see yet another major hit to Westpac’s bottom line. A similar claim against NAB, involving just 50,000 customers resulted in a payout of nearly $50 million.

On the bright side even that would pale in comparison to the $1.3 billion Westpac was fined earlier this year for repeated breaches of the anti-money laundering and counter-terrorism financing laws.

Similar class action notices involving ANZ and the Commonwealth Bank are expected to be sent in the coming months.

With misconduct having already cost the banks hundreds of millions of dollars, it looks like there might be plenty more to come.

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