A mother from Central NSW can finally “breathe and look forward to the future” after pocketing a monster refund for dodgy insurance she was sold.
Teenah and husband Troy recently received more than $111,000 following an investigation into their mortgage protection, and consumer advocates say their case — and others coming to light — could be the tip of the iceberg.
Teenah said she felt something was wrong with her home loan when the couple’s years of diligent payments failed to make a significant dent in their balance. They tried to terminate the insurance “but it was so hard”.
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Then she came across a morning news segment on junk insurance, which refers to unnecessary or worthless coverage attached to loans and credit cards.
Her next move was to reach out to Claimo, a firm that helps consumers find out if they were misled into buying insurance they did not need.
It took about three years from their first inquiry but Teena and Troy recently received more than $111,000.
“I was in disbelief because it can feel like the little people can’t win against the bank,” Teenah told 7NEWS.com.au.
“We’ve put the money straight on the mortgage so we’ll own our house in a year or two, rather than 10 or more.
“We already see (the loan balance) drop week by week. We can breathe and look forward to the future.”
Teenah said the refund was way more than she imagined she might receive, and they had been tempted to splash on something nice.
“Of course, it was spent everywhere in my mind but we did the sensible thing,” she said.
A banking royal commission led banks to set aside $10 billion to refund people who had purchased junk insurance on credit cards or loans.
About $40 million has been paid out by the big four banks so far, according to Claimo which takes a 30 per cent fee from any refund it helps secure.
“If you took out a loan with a major bank in the early 2000s onwards — personal loans, home loans, credit cards, you name it — the likelihood is that you were duped into purchasing add-on insurance,” company director Nathan Mortlock said.
“Most consumers weren’t told the loan insurance was optional. What happened was that the value of the insurance on the loan was bundled into the total amount of the loan, often at the time of signing, substantially increasing the payable interest, and resulting in the loans taking up to a third longer to pay off.
“The interest applied to the loan was often applied to the loan insurance, an unnecessary double whammy for consumers.”
Mortlock said a big win was ensuring compensatory interest is included in refund calculations, making a big difference to the total amount dropped into the pockets of consumers.
How to claim
If you hope to collect, the onus is on the customer to apply.
“These guys will rarely make an offer to refund the money. Advocates like ourselves have had to fight for these refunds, plenty of which have been sizable and, in some cases, life-changing,” Mortlock said.
The first step, he said, is to check loan paperwork for terms including “consumer credit insurance” or “mortgage loan insurance”.
Those who remain unsure should contact their financial institution.
If the insurance was rolled into repayments, there is a good chance you also wrongly paid interest on that insurance, according to Mortlock.