Misconduct relating to used car financing to vulnerable customers on ASICs hit list
It comes as no surprise to anyone that ASIC announced that it wanted to take a closer look at the used car industry as one of its priorities for 2024, as far too many customers continue to be sold dodgy cars and be stitched up on the finance at the same time.
ASIC commissioner, Alan Kirkland, restated this as a priority for ASIC at a recent keynote speech for the Consumer Rights Forum, warning dealers and brokers that they are on notice to make sure they are complying with the law in this space.
While the matter is still before the courts, it is on the public record that ASIC alleges that over nearly two years, Money3 failed to properly assess whether certain borrowers could meet their repayment obligations before offering finance for second-hand cars. Watch this space.
When things do go wrong for consumers, there are protections built into the law to protect them from being “taken for a ride”, but while they are well intentioned, often the vulnerable people they are designed to protect are just not in a position to seek help. If your car has just been towed away and you can’t afford the repairs AND you’re still making payments on the finance – the chances of you being able to afford legal advice are pretty slim.
ASIC claims it receives well over 10,000 complaints each year and while they acknowledge that they can’t review them all, they do have systems and processes in place that can identify trends in the complaint data. There is a good chance that if a broker has a couple of complaints lodged about them ASIC won’t be far behind.
Your obligations as an ACL holder
While brokers have a number of regulatory obligations, a key consideration is to make sure you’re meeting the responsible lending obligations (RLOs) in Chapter 3 of the Credit Act, including:
- make reasonable inquiries about a consumer’s financial situation, and their requirements and objectives
- take reasonable steps to verify a consumer’s financial situation
- make a preliminary assessment about whether the credit contract is ‘not unsuitable’ for the consumer.
It’s worth remembering that this is not a “one size fits all” approach and you need to consider your customers’ circumstances on an individual basis when applying the RLOs.
Assessing a casually employed, first time applicant with a mediocre credit score who can’t resist a BNPL offer is likely to be a different process to reviewing an asset backed applicant with a great credit file and loads of capacity who has had a number of loans previously.
Need help? Contact the team at Cornerstone today.