Commonwealth Bank will refund about $10 million to more than 65,000 customers after the corporate regulator found it sold consumer credit insurance to people ineligible for its benefits.
The lender will also refund about $586,000 in premiums after over-insuring nearly 10,000 customers against their Commonwealth Bank home loan.
The Australian Securities and Investments Commission on Monday said CBA sold the CreditCard Plus insurance along with credit cards, personal loans, home loans and car loans between 2011 and 2015.
The insurance is typically marketed to borrowers to help them meet repayments if they become sick, injured or involuntarily unemployed, but these 65,000 customers were students or unemployed and therefore unlikely to meet the criteria necessary to make a claim, ASIC found.
ASIC deputy chair Peter Kell said it was unacceptable that customers were sold insurance that did not meet their needs.
"One of ASIC's priorities is addressing poor consumer outcomes associated with add-on insurance,," Mr Kell said.
"Consumers should not be sold products that provide little or no benefit, and banks should have processes in place that ensure this."
The regulator also found that, between 2007 and 2015, CBA did not adjust the amount of cover under a policy if customers borrowed an amount was less than the original loan they applied for.
This resulted in about 10,000 customers being charged for more cover than they needed under the policy.
The refunds represent another blow to the bank's reputation after problems in its financial planning and insurance businesses.
It follows allegations by financial intelligence agency AUSTRAC that Commonwealth Bank breached money laundering and terrorism financing laws by failing to provide on-time reports for more than 53,500 transactions.
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