ASIC has recently announced the establishment of a Consumer Credit Insurance (CCI) Working Group, who have been tasked with improving outcomes for CCI customers.
The CCI Working Group will progress a range of reforms. A key reform will be the introduction of a deferred-sales model for CCI sold with credit cards over the phone and in branches. This means that banks will be prohibited from selling a CCI policy until at least four days after the customer has applied for their credit card. The intention of this reform is to reduce the risk that the customer will feel pressured to purchase the CCI policy or purchase a CCI policy that does not meet their needs. The deferred-sales model will not apply to CCI sold online or with homes loans and personal loans (though other measures will be introduced to ensure good consumer outcomes in these areas).
The CCI Working Group will be responsible for determining how the deferred-sales model will work. In addition, the CCI Working Group will determine:
- What measures need to be implemented for CCI sold with credit cards over the internet;
- Other measures to promote good consumer outcomes (including well informed decision making) for CCI sold with credit cards and other loan products. For example, the banks have committed to strengthening their processes for obtaining express consent from customers who purchase CCI and providing improved disclosure about the cost and duration of the policy; and
- The data necessary to ensure that the success of these reforms can be monitored (e.g. data on complaints, claim performance and cancellations).
CCI has historically been a key focus for ASIC, with ASIC’s view being that CCI is associated with poor consumer outcomes. ASIC has previously focused on CCI sold through car dealerships, and has commenced surveillances into past CCI practices by banks.
The CCI Working Group includes representatives from ASIC, the Australian Bankers’ Association (ABA), banks and consumer advocacy groups. The ABA will incorporate the measures identified by the CCI Working Group into the revised Code of Banking Practice and will accelerate their introduction so that they commence in the first half of 2018.
Further information can be found here.