NAB to pay back $49m for credit insurance

NAB agreed to settle a class action over insurance sold for some credit cards and personal loans

Students, pensioners and the unemployed will get back the hundreds or thousands of dollars they paid for "junk" insurance under a $50 million settlement with National Australia Bank.

NAB agreed to settle a class action over insurance sold to credit card and personal loan customers who would not have been able to claim against the policy.

Slater and Gordon lawyer Andrew Paull estimated tens of thousands of NAB customers would share in the $49.5 million settlement, which will go to the Federal Court for approval in January.

He said students, pensioners and the unemployed were sold "next to worthless" insurance intended to provide protection for unemployment.

"Those people ought never, in our view, have been sold those products because they were very unlikely to benefit from them," Mr Paull said.

About 400,000 customers were sold the credit card and personal loan insurance products but only those who were not eligible to claim against them would be compensated.

Mr Paull said the premiums amounted to hundreds or even thousands of dollars a year for many people.

"For a person who is unemployed, for a person living on the disability pension, a few hundred dollars a year or a thousand dollars a year makes a very big difference," he said.

NAB chief legal and commercial counsel Sharon Cook said the settlement was the right thing to do for the bank's customers and shareholders.

"As we have said, we can only move forward if we deal with the past, so that we can earn trust among customers and the broader community and grow confidence in the future of NAB," she said.

Mr Paull noted NAB and the other major banks no longer sold the consumer credit insurance products.

An Australian Securities and Investments Commission report in July found consumer credit insurance represented "extremely poor value for money" and was regularly mis-sold.

At the time, the regulator said more than 300,000 customers of the big banks and other lenders were expected to be paid over $100 million in remediation.

Consumer credit insurance provides cover if people are unable to meet minimum loan repayments due to unemployment, sickness or injury.