The National Australia Bank (NAB) has agreed to pay $49.5 million in compensation to tens of thousands of customers who were sold junk credit card and personal loan insurance.
The bank, and its subsidiary MLC Limited, have settled a class action taken against them in the Federal Court.
The amount to be paid to each customer is still to be worked out, but the court hopes they will be notified by Christmas if they will receive a payout.
The action, taken by law firm Slater and Gordon, alleged NAB and MLC engaged in unconscionable conduct in selling consumer credit insurance (CCI) to customers.
They included pensioners, casual workers, and unemployed and critically ill people who were ineligible to claim or unlikely to benefit from the policies.
It was also alleged NAB engaged in misleading and deceptive conduct when selling the insurance.
Earlier this year, the corporate regulator gave a scathing assessment of CCI policies offered in Australia, finding they were “extremely poor value for money”.
On average, customers only received 11 cents for every dollar spent on CCI premiums linked to their credit cards, the Australian Securities and Investments Commission (ASIC) revealed in its July report.
CCI policies offer to provide payouts to help cover loan or credit card repayments if someone is sick, injured or loses their job and cannot meet the minimum repayments.
The regulator scrutinised all CCI products – including mortgages and personal loans – offered by Australia’s 11 biggest banks and lenders, including Westpac, ANZ, NAB and the Commonwealth Bank/Bankwest.
Last November, the selling of junk CCI came under sharp criticism at the banking royal commission — in particular, cold call selling of the products.