Know your rights
With credit-related insurance, repayment waivers or extended warranties under the Credit Contracts and Consumer Finance Act (CCCFA), a lender must:
- not be unreasonable about the terms on which you take out the insurance
- disclose the terms of the credit-related insurance contract before it is arranged
- if they arranged the insurance, provide a proportionate rebate of the insurance if you repay the contract’s full unpaid balance.
An unreasonable requirement is one that is not reasonably necessary for protecting your or the lender’s interests.
Lenders must make reasonable enquiries before you agree to a credit-related
insurance contract. They need to be satisfied that the insurance will meet your requirements and also that you will be able to make the payments without suffering substantial hardship.
Check the terms of any credit-related insurance carefully, including the cost, duration and eligibility criteria for claims, before you sign
Lenders must also help you to make an informed decision about whether to enter into the contract.
Read about the Responsible Lending Code to find out more.
If you don’t agree to take out any form of credit-related insurance but you are still charged for it, this may be in breach of the Fair Trading Act. It is illegal to make you take out this insurance. Lenders may not make false or misleading representations about your agreement to acquire products or services. In this case you should ask the lender to cancel the credit-related insurance and you should receive a full refund.
If you pay back your loan debt early and you have credit insurance, the lender must refund you the unused portion of the insurance premium. This can be deducted from the final settlement amount to pay off your debt.
A refund doesn’t apply to extended warranties or repayment waivers.