ASIC action results in Australia’s largest consumer credit remediation program

1202398876_1_AUGroups(Alex_Samson_lr_Brisbane)Car financier BMW Australia Finance Limited (BMW Finance) has given the Australian Securities and Investments Commission (ASIC) an enforceable undertaking whereby BMW Finance will implement Australia’s largest consumer credit remediation program to compensate customers for its responsible lending failures. BMW Finance provides motor vehicle finance to consumers, both directly and through a network of motor vehicle dealers.

The enforceable undertaking follows previous regulatory actions taken by ASIC in relation to BMW Finance’s lending and collections activities, with ASIC having issued 22 infringement notices to BMW Finance in February 2016 for breaching consumer protection provisions in relation to repossession of motor vehicles and responsible lending breaches.

The remediation program will identify at least 15,000 consumers who may have suffered hardship as a result of BMW Finance’s compliance failures, and ensure appropriate remediation. The remediation program will be overseen by an independent remediation consultant and see BMW Finance pay $77 million, made up of:

  • $14.6 million in remediation payments;
  • $7.6 million in interest rate reductions on credit contracts;
  • $50 million in loan write-offs; and
  • a $5 million community benefit to contribute to consumer advocacy and financial literary initiatives.

BMW Finance will also remove default listings and buy back all debt sold to third parties to ensure written-off loans are not subject to further collection activities.

In addition, ASIC has amended BMW Finance’s Australian Credit Licence to extend an external compliance consultant condition (originally placed on the licence in January 2016) until the end of 2017. The condition requires the consultant to conduct ‘live review’ testing of credit applications, as well as review a sample of current credit contracts for compliance with responsible lending obligations.

The ASIC Deputy Chairman has indicated that BMW Finance ‘had a sales-driven culture that failed to comply with the requirements of credit laws’ and the outcome should ‘act as a warning to other car financiers to get their houses in order’. However, it is worth noting that ASIC has a particular focus on responsible lending laws across the credit industry, and not just the car financing space.

Further information can be found here.

This blog was co-authored by DLA Piper graduate Ann-Marie Coleman.