Redundancy Car Insurance

Commerce Commission has just reached a settlement with the Auckland courts in which they have to pay back $788,000 in refunds to borrowers that were required to insure their car loans. However, the car loans were insured against the risk of redundancy, even though they were out of work when they got the original car loans.

Club Finance’s auto loan customers took out insurance that would pay if they lost their jobs to if they were injured and could not work, even though they did not have jobs, and therefore could not collect the insurance. Even if they got jobs, because they had not gotten them until after they got the insurance on the car loan, they would not be eligible for any kind of assistance should they actually end up needing the insurance.

Club Finance agreed to pay back their auto loan customers, with most refunds averaging around $504. They have already refunded over 1,500 customers. They admitted to breaching the Credit Contracts and Consumer Finance Act by “requiring unemployed borrowers to have redundancy and injury insurance.”

The law says that they cannot be made to take out insurance that is not “reasonably necessary” which is where the company got into trouble. The court said that they could not think of anything more redundant that redundancy insurance for the unemployed. The company will refund all car loan patrons who were affected by the insurance.

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