Trending Financial News 21 November
NAB to pay $50M in compo to customers
National Australia Bank has agreed to pay $49.5 million to settle a class action lawsuit over Consumer Credit Insurance (CCI).
NAB and subsidiary MLC sold NAB Credit Card Cover (NCCC) and NAB Personal Loan Cover (PLC) to about 400,000 customers. Lawyers Slater & Gordon claimed the insurance was “of little or no value” and customers would “never have been eligible to claim.”
NAB's lawyer, Sharon Cook, said the settlement was “the right thing to do” for customers and shareholders.
“It’s important to note NAB no longer sells CCI products.”
What is Consumer Credit Insurance?
Consumer Credit Insurance (CCI) is insurance sold to people who are taking out a loan or a credit card. ASIC has warned that CCI consistently fails consumers and is often sold to people who are ineligible to make a claim.
ASIC reported in 2019 that CCI is typically of “very low value” and has been sold and promoted unfairly. ASIC is requiring lenders to repay $100 million to over 300,000 CCI customers. So far $51 million has been paid to over 186,000 consumers.
Westpac in trouble over money laundering
The Anti money-laundering and terrorism financing regulator, AUSTRAC, alleges that Westpac has contravened the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) on more than 23 million occasions between November 2013 and February 2019.
AUSTRAC’s statement read: “These contraventions are the result of systemic failures in [Westpac’s] control environment, indifference by senior management and inadequate oversight by the board.
AUSTRAC said Westpac failed to monitor and report international money transfers that had a high risk of being involved in money laundering, terrorism financing or child exploitation.
Westpac responds to money laundering charges
Westpac faces charges relating to 23 million international money transfers it did not properly monitor or report to regulators.
Westpac Group CEO Brian Hartzer recognised the importance of the charges and said Westpac is committed to assisting law enforcement agencies to stop financial crime.
“These issues should never have occurred and should have been identified and rectified sooner.
“It’s disappointing that we have not met our own standards as well as regulatory expectations and requirements.”
Mr Hartzer said: “We have implemented a range of additional steps in our processes including enhanced automatic detection systems.”
New rules restrict banks selling your debt
Banks will have to help a customer with their overdue debts before selling it to a debt collector under new guidelines announced by the Australian Banking Association yesterday.
The new rules for dealing with debt collectors are a “a major step up in safeguards” for vulnerable customers said the ABA. Banks will no longer sell a debt that is in dispute or that has little likelihood of being repaid.
CEO of Financial Rights Legal Centre Karen Cox said the new guidelines mean small bank debts will not easily lead to homelessness and disproportionate financial loss.
Which debt collectors use bankruptcy?
Financial Counselling Australia, Financial Rights Legal Centre and Consumer Action Law Centre reviewed applications for bankruptcy in the Federal Court and found some debt collectors and financial institutions use bankruptcy more than others.
Last financial year Lion Finance made 512 applications to make debtors bankrupt, CCC Financial Solutions made 28 applications and Complete Credit Acquisitions made 20 applications.
American Express made 119 applications. BMW Australia Finance made 23 applications.
Commonwealth Bank made seven applications, Westpac one, NAB one and ANZ none.
Prospa grows lending
SME lender Prospa has reported strong growth in loan sales and customer numbers.
In the four months from July to 31 October, Prospa loan sales were up 40 per cent from the same period one year before with Prospa growing total loan customer numbers to 24,000.
Prospa’s total loan book currently sits at $1.3 billion. Prospa said 43 per cent of its customers have excellent credit ratings and are considered ‘premium’ borrowers.
FHB scheme price caps “too low”
The Morrison government’s First Home Loan Deposit Scheme has property price caps for Sydney and Melbourne first-time buyers that are well below the median prices in those markets.
The maximum price cap for the scheme in Sydney will be $700,000 and in Melbourne $600,000. CoreLogic reports the median house price in Sydney is $920,000 and the median unit price is $720,000. In Melbourne the median house price is $751,000 and the median unit price is $558,000.
First home buyers in Sydney and Melbourne “might as well not waste their time” with the First Home Loan Deposit Scheme according to experienced mortgage broker Louisa Sanghera of Zippy Financial.
“The price caps have been set so ridiculously low in these capital cities that most buyers won’t qualify anyway,” Louisa Sanghera told Mortgage Business.
“Or will end up buying a cheap and inferior property which may cost them far more in the long run.”