* ASIC warns banks of enforcement action
* Regulator “deeply troubled” as sales “consistently failed consumers”
* Some banks have stopped selling some of the products (Adds responses of banks)
By Paulina Duran
SYDNEY, July 11 (Reuters) - Australia’s corporate regulator threatened on Thursday to prosecute some of the country’s largest banks over their sales earlier this decade of consumer insurance products that it said had harmed customers.
The Australian Securities and Investments Commission (ASIC) said in a report that consumer credit insurance products, which cover credit card debts or loans when a person loses their job, falls sick or gets injured, had “consistently failed consumers”.
It said a seven-year review of the sales practices and products of Commonwealth Bank of Australia, Citigroup , Australia and New Zealand Banking Group and eight other lenders had showed they “caused consumers harm” and were “extremely poor value for money”.
“We are deeply troubled by the findings in our report, and the stories they tell of unfair practices occurring within Australia’s largest and most well-known financial institutions,” ASIC Commissioner Sean Hughes said in a statement.
“An inevitable consequence of these widespread failings and mis-selling practices will involve ASIC taking significant enforcement action against some of the entities named in our report,” Hughes added.
The regulator’s report and threat of action follows over A$100 million ($69.58 million) in remediation made to over 300,000 consumers and revelations at a powerful inquiry that banks were aware of the problems for years but continued selling the products.
The remediation payout, however, pales in comparison to the roughly 30 billion pounds ($37.61 billion) spent to redress the mis-selling of payment protection insurance (PPI) in Britain, making it that country’s biggest financial scandal.
ASIC said its investigation, for the period 2011 to 2018, found that on average, insurance sold to cover credit card debts had paid only 11 cents for every dollar that consumers spent in premiums.
It said the products were sold to people that were ineligible to claim their policy, for example, due to unemployment. It also found that telephone sales staff used high-pressure selling tactics, and that consumers were given poor personal advice to buy the policies.
ASIC threatened to intervene to get the products banned and said it would investigate “suspected misconduct of several entities involved in the CCI product market” and would take public action against the culprits.
Representatives from CBA did not respond to an email seeking comment. In March, just days before the inquiry began examining misconduct in the consumer credit industry, the bank stopped selling credit-card and personal-loan insurance.
At the inquiry, CEO Matt Comyn said that his predecessor, Ian Narev, told him during a 2015 meeting to “‘Temper your sense of justice’,” in response to his advocating ceasing sales of the products.
ANZ said it had stopped selling insurance for credit cards and personal loans to its customers, but it still sold home loan insurance.
“It’s important customers are able to consider whether insuring their mortgage is right for them,” a spokesman said in an email.
Citi, which according to ASIC had a claims ratio of only 4.8 cents of every dollar paid in credit card insurance premiums, declined to comment. ASIC’s report said the lender had ceased sales of the product. ($1 = 1.4372 Australian dollars) ($1 = 0.7976 pounds) (Reporting by Paulina Duran; Editing by Muralikumar Anantharaman)