The banking royal commission has heard how a private funeral insurance company with no Aboriginal affiliation used the rainbow serpent in its marketing materials and targeted Indigenous customers.

Key points: Aboriginal Community Benefit Fund used rainbow serpent in advertising, but it was not an Indigenous-affiliated organisation

Aboriginal Community Benefit Fund used rainbow serpent in advertising, but it was not an Indigenous-affiliated organisation Customers believed any money paid which exceeded coverage amount would be returned to families

Customers believed any money paid which exceeded coverage amount would be returned to families Elders paid into funeral fund for years, with many customers signed up being under 30

At the commission's second day of hearings in Darwin, representatives from corporate regulator ASIC and Financial Counselling Australia outlined "predatory practices" of payday lenders, rent-to-buy schemes, car dealers and funeral insurers affecting Aboriginal and Torres Strait Islander customers in remote communities.

The first company under scrutiny, Aboriginal Community Benefit Fund (ACBF), describes its funeral plan as "tailored to meet the needs" of Aboriginal and Torres Strait Islander Australians.

Tracey Walsh from Mooroopna in Victoria gave evidence of her experience with ACBF, which she first encountered at the Aboriginal cooperative where she works.

"On the posters it had the rainbow serpent, which is very important to the Indigenous community," she told the hearing.

Ms Walsh said she signed up to a funeral plan in 2005 but became concerned that her policy was only for $8,000, after she and her sister paid more for their parents' funerals.

In 2008 she received a certificate in the mail stating she had attained the benefit amount.

"What did you understand this certificate to mean?" counsel assisting Rowena Orr QC asked.

"That I had paid my $8,000 policy," Ms Walsh said.

"What did you think would happen to any money you paid after this time?" Ms Orr asked.

ACBF customer Tracey Walsh said elders paid into the fund for years. ( Supplied )

"Any money that was left over or paid over that amount would go to my family."

In 2016, Ms Walsh began dealing with the Consumer Action Law Centre, which made a complaint to ACBF on her behalf, alleging she had been misled into thinking it was an Aboriginal organisation and that all of the money paid into the plan would be available on her death.

ACBF lawyers hit back at the claims in a letter, saying the allegations were false and pointing out that Ms Walsh had taken 11 years to seek legal advice.

Last month, ACBF settled the dispute and increased Ms Walsh's cover to $10,000 with no further premiums to be paid, on the condition she drop a complaint that had been made to the Financial Ombudsman Service.

Elders paying into funeral funds for years

Ms Walsh told the commission other people in her community were signed up to ACBF plans.

"People are in the same position as me, that they think they will get all their money back," she said.

"I've got elders that have been in these funeral funds for years, and the plan to give the money to their families so that they can survive. Now, these elders will go to their grave not knowing how hard it would be for these families.

"These people have been used and used and used over the generations and it's just another profit making off our backs."

ACBF's legal counsel cross-examined Ms Walsh, showing her a document containing a disclaimer that the company was private and not connected with any Aboriginal organisation. Ms Walsh said she had never seen the document.

ACBF to stop door-to-door sales tactics

ACBF chief executive Bryn Jones was next to give evidence. He told the hearing he was recently appointed to "to bring a fresh and transparent perspective" in light of "media misrepresentation".

"This wasn't about your customers, this was about the way the media were portraying you?" Ms Orr asked.

"Correct," replied Mr Jones.

Counsel assisting Rowena Orr QC pointed to evidence the ACBF had a high number of lower-age policyholders. ( Supplied )

Mr Jones maintained that the company is run for the benefit of Aboriginal and Torres Strait Islander Australians but conceded that did not make it an 'Aboriginal organisation'.

When questioned about customers who believed they would be refunded any premiums paid beyond their policy amount, Mr Jones said it was "unfortunately" the nature of insurance that people pay 'under' or 'over' the amount they are covered for.

He said ACBF is currently investigating whether it is financially viable for it to not require further payments once a customer has already paid in the maximum amount that they could claim in benefits.

Mr Jones also told the hearing the company would stop doing door-to-door sales and undertake a "cultural audit".

Two-thirds of policyholders under 30

The ACBF chief executive insisted the company did not target children and babies, despite nearly two-thirds of its policyholders being aged under 30. Around a third are under 18.

Ms Orr pointed to a 2013 ASIC report that found ACBF had the highest proportion of policyholders in the lower age brackets of any funeral insurance companies.

"We're not actively going for children and grandchildren," Mr Jones said.

When asked why ACBF sold so many policies to children and young people, he gave the example of an Indigenous friend around his age who had attended 57 funerals, whereas he had only been to six.

"Individuals elect to take up a policy because of their experience with mortality," Mr Jones said.

Mr Jones will return to give further evidence on Wednesday.