Australian banks are preparing themselves to refund billions of dollars to over 6 million customers over junk insurance funds
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The Royal Commission has ordered banks to reserve $10 billion for refunds to customers who are now seeking compensation over junk insurance funds.
It was reported that a number of banks have sold junk insurance to thousands of Australians for years, incurring unnecessary costs from loans and other financial services.
Claimo chief executive Nathan Mortlock said that an estimate of more than 6 million Aussies may have been affected by the scheme.
“We think about 6.5 million Australian adults could be affected.”
Banks are being urged by the Royal Commission to set aside funds to return to millions of Australians who have purchased junk insurance. Credit: Getty Images.
The company, which provides assistance to people who are seeking to collect funds from junk insurance schemes, has seen "shocking" amounts of money being returned to their clients.
"One of our clients had received a $64,000 refund," Mr Mortlock said.
“I was speechless and pretty much choked on my lunch.”
One of Claimo's clients, Lucy Rolley, had recovered $18,000 from her former financial service provider after she found out that she had been "ripped off".
The Brisbane woman said that she had been advised to take out "extra insurance" after she applied for a loan to buy her first car for $26,000 in 2011.
Lucy claimed that the bank employee told her that the insurance would "secure the funds" that she was borrowing.
“I got told if I didn’t take extra insurance out, I wouldn’t be able to get my loan,” she said.
She also disclosed that the bank allegedly did not explain the insurance scheme in detail.
Lucy, who was 21 at the time, admitted that she purchased the insurance without giving it much thought, thinking that she was being diligent in doing so.
However, after she crunched the numbers years later, she discovered that the deal was a total "rip off".
She quipped: “They sold my car to me for $26,000 and I ended up paying just under $60,000 for my car.”
“That’s when I realised I was over-charged.”
Some customers have regained thousands of dollars from unnecessary junk insurance. Credit: AAP.
Victorian father and daughter Ricky Emmett and Nicole Venianakis had also regained thousands of dollars in refunds.
Ricky had been refunded $9847 for unwanted junk insurance on three car loans, while Nicole recovered $2900 from two car loans.
Ricky described the refunds as a "win" for his family, saying: “This is a financial win for my family and I hope it inspires other everyday Australians to pursue the money they’re owed.”
“When I took out these loans, I didn’t even know junk insurance existed. I did what everyone does when applying for a loan – I read what was provided, believed what I was told, and signed on the dotted line.”
If you suspect that you have purchased junk insurance, 7NEWS Finance Editor Gemma Acton shared some tips on how you can get your cash back.
She advised: "Start by looking at your statements and figuring out if you think you might be involved."
“It’s a pretty boring job, but going through your statements line by line is really helpful.”
“It doesn’t sound like fun, but there could be a financial reward at the end of it, so worth it."
“But if you see something on your statements - a regular fee, maybe once a month, and you can’t explain it - that’s a pretty good indication that you could very well be paying for insurance that you don’t know about, and you don’t need.”
Ms Acton also emphasised that customers should not rely on getting a notification — a letter or a call — from your financial institution, recommending they proactively reach out to their provider, lender, or bank as soon as they spot an unknown fee.
You may also consult with several agencies — such as the Australian Financial Complaints Authority or the Consumer Action Law Centre — and private companies that could provide you assistance to recover your funds.
So, there you have it, folks! Make sure to do thorough research and know all the details about an insurance policy before purchasing it to avoid incurring unnecessary costs and going through all the hassle of getting them refunded.
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