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QLD Loan Protection Insurance - Contact Financial Ombudsman?

Discussion in 'Australian Consumer Law Forum' started by matt-e, 22 January 2016.

  1. matt-e

    matt-e Member

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    Hi everyone,

    In the last few weeks, I have been trying to get on top of our finances as we recently found out baby #2 is on the way. One thing I wanted to to chase up was some car loan insurance protection I cancelled back in July last year.

    We took out a 3-year car loan to purchase a new vehicle in October 2014. The finance was arranged through the dealer with a well-known bank but we also chose to take out loan protection insurance through a separate company. The total loan protection premium for the 3 years was approximately $3,200 and this was added to the loan.

    After 9 months, we decided to cancel the loan protection insurance. We were informed that the credit of outstanding premium would be paid back to our loan provider. Fast forward to now and I thought I would check with my loan provider that they actually received that credit. I also wanted to know whether my weekly repayments would reduce or whether the term of the loan would be reduced.

    I asked them to check for the credit which should be approximately $2,200 but the advisor told me he could see no trace of that amount on our account. I then called back the loan protection company and asked the advisor to double check that the credit had been processed. She said it had and gave me a date of when it was processed. I then asked her how much it was for and she told me they don't like to give out that information. I asked her again and explained how can my loan provider be expected to trace the transaction if you cannot tell me how much it was for (she had already asked me identification questions so it wasn't a security issue). Eventually, she said it was a sizeable amount, around $1700. I was shocked it was so low.

    Doing my calculations....

    Premium for 36 months = $3,200;
    Cost per month: $3,200 / 36 = $88.89
    Cost for 9 months: $88.89 x 9 = $800Unused premium: $3,200 - $800 = $2,400
    Amount of unused premium credited back to me: $1,770
    Difference between unused premium and amount credited: $2,400 - $1,770 = $630

    So.... there you can see I have been charged a total of $630 for the cancellation of the policy. The fact the advisor was reluctant to tell me the amount can only make me feel they are trying to hide their unreasonable cancellation fees. I then went to check the terms and conditions in the PDS we were given which states the following:

    "If you or we cancel the policy after the cooling off period, we may deduct a proportion of the premium for time on risk and reasonable administrative costs related to the acquisition and termination of the policy in accordance with any relevant legislation, together with any government taxes or duties that we cannot recover."

    Now this wording to me seems very vague. It does not state an exact figure of the charges involved in the cancellation of the policy. It is so loosely worded that it kind of implies they are free to charge what they like ― surely this cannot be legal. I would not agree that $630 is a reasonable administration cost. I would class it as a very excessive administration cost. The very fact they didn't want to release this information to me over the phone means that they must think so too.

    I would like to challenge this and my first course of action will be to contact the loan protection provider with a letter explaining this. However, I would like to know what course of action I should take to raise this matter further should I need to. Would the next point of contact be the financial ombudsman?

    Thanks in advance
     
  2. Therese

    Therese Well-Known Member

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    Hi Matt-e,

    Yes, after sending a letter to the loan protection provider I would contact the financial ombudsman.

    Hopefully this option works and you don't have to pursue legal representation.
     
  3. Therese

    Therese Well-Known Member

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    Hi Matt-e,

    Yes, after sending a letter to the loan protection provider I would contact the financial ombudsman, however another option is to contact NSW Fair Trading.

    This blog may be useful: Hidden Fees? Your Australian Consumer Law Rights - Legal Blog - LawAnswers.com.au. If a consumer if not made aware of cancellation fees prior to agreeing to use the service of the provider then an action may be possible under Australian Consumer Law.

    It is possible your case is about 'unfair terms'. I would suggest reading this Unfair_contract_terms.

    Hopefully you are able to raise a complaint and get a refund on the hidden cancellation fees.
     

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