Junk insurance – the Royal Commission digs deeper


Junk insurance – the Royal Commission digs deeper

140,000 Commonwealth Bank customers have been refunded ahead of the royal commission, which has pulled focus on the CBA’s ‘junk insurance’.

The refund in question is for ‘add-on’ insurances, which an internal review found were not suitable, as many holders were ineligible to even claim, if they sought to. 

As a result, the ‘junk’ insurances are essentially useless. Today, we’re updating you on what else is happening with the Royal Commission into the Australian finance industry.

More on the refunds

The CBA is refunding the cost of its ‘junk’ insurance products, plus interest, to consumers who purchased it.

The two products were sold as a ‘safety net’ for people who lost their job, and then needed funds to meet repayments.

For more information on the refunds, head to this Consumer Advocacy website.

The Royal Commission

The mortgage broking sector has also been under the Commission’s microscope, with concern as to conflicts of interest within the industry.

Earlier this month we blogged about the enquiry, and the need for transparency within the mortgage broking system, so as to protect consumers from brokers and lenders who do not have their best interests at heart.

We’re happy to have assisted the Commission with its enquiry, with some of our mortgage brokers speaking freely about how they research, tailor and recommend loans to clients.

We are saddened that some brokers recommend loans in order to maximise their own profits. This is strictly against what Capita stands for, especially as we have built our business on a relationship-based model, rather than a typical transactional one.

We think it’s important you know what is currently being investigated by the Commission. As we said, transparency matters.

Conflict of interest

CBA’s Executive General Manager of Home Buying, Daniel Huggins, told the Commission that a conflict of interest existed, since mortgage brokers are paid a commission by the bank.

The commission itself is relative to the size of the loan, and the longer it takes for the loan to pay off, the larger the trail commission received by the broker.

As a result, a broker may seek to maximise the length of repayments, and the size of the loan, to boost their own commission.

Why we don’t do this

Finding you a loan that saves you more, and matches your goals, is our ultimate objective. We believe that if we find you a loan that works for your entire life circumstances, then you’ll be more likely to secure investment success.

The last thing we want is for our clients to experience difficulty paying off a loan. It’s just not how we tick, and to be frank, we’re annoyed other brokers take advantage of the trust their clients place in them.

We want you to succeed on your finance journey, and then come back to us for support on your next one. If you’re struggling with your first loan, that’s just not going to happen.

Our business is built on strong connections, between our people, our clients and our ethos. (Take a look at our Facebook page and see how many of our clients agree!).

On the back of the Royal Commission, we are pleased that the finance industry is being scrutinised to the nth degree. Transparency and accountability always yield positive outcomes for consumers, even if it means shaking up an industry.

If you want support with your next home loan, from people who care about saving you more, and finding a loan that matches your goals, please talk to us.

  

Financial Advice Disclaimer: This information is general in nature. Mortgage brokers do not provide financial advice. Clients seeking financial advice will be referred to a qualified financial planner.

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