Following concerns raised by ASIC, CGU Insurance, together with Accident and Health International Underwriting have agreed to refund consumers over $2,000,000 in payday loan consumer credit insurance (CCI) premiums and fees. The insurance was sold by The Cash Store, now in liquidation, alongside payday loans to consumers.
The agreement follows earlier court action by ASIC against The Cash Store, in which the Federal Court found that The Cash Store had acted unconscionably in selling a payday loan CCI product (CCI product). The CCI product covered consumers against the risk of becoming unemployed, sick or dying during the period of the payday loans, which could be as short as one day, and was usually around two weeks.
ASIC’s court action against The Cash Store was in respect of its conduct between August 2010 and March 2012. In this period:
- The Cash Store sold the CCI product to 182,838 customers
- these customers paid $2,278,404 in premiums for cover
- only 43 claims were paid to consumers, totaling only $25,118.
‘ASIC took action because we were concerned about the unfair sale of the payday insurance when it was highly unlikely that consumers would be able to make a claim. We therefore welcome CGU and AHI’s agreement to refund more than $2 million to these consumers,’ ASIC Deputy Chair Peter Kell said.
To address ASIC’s concerns and minimise the risk of this type of conduct occurring again, CGU and AHI have agreed to:
- refund total amounts paid by consumers, together with interest, for all sales of the CCI product for which CGU was on risk for the product (including sales in 2013 when a modified version of the policy was reintroduced)
- review claims it denied where the consumer did not meet the eligibility requirements for a claim at the point of sale under both the initial and modified versions of the policy
- appoint an independent external firm to review its supervision of third parties
- appoint an independent external firm to review AHI, a wholly owned subsidiary of CGU, who was responsible for underwriting the payday loan insurance product.
ASIC’s inquiries into the sale of the CCI product by The Cash Store and the role of other entities is ongoing.