A major car financier will implement Australia's largest consumer credit remediation program to compensate customers for its responsible lending failures.
ASIC yesterday announced that it has accepted an Enforceable Undertaking (EU) from BMW Australia Finance Limited (BMW Finance), which provides motor vehicle finance to consumers, directly and through a network of motor vehicle dealers.
ASIC said the affected consumers have car loans for a wide range and variety of vehicles and car brands, both new and second hand.
The program which is open to all of its customers under the BMW Financial Services, Mini Financial Services and Alphera Financial Services brands, will provide at least $72 million in redress for consumers made up of:
• $14.6 million in remediation payments;
• $7.6 million in interest rate reductions on current contracts; and
• $50 million in loan write offs.
BMW Finance has also agreed to pay a $5 million community benefit to contribute to consumer advocacy and financial literary initiatives.
An ASIC statement explained that the remediation program will identify at least 15,000 customers, who between January 2011 and August 2016 may have suffered hardship as a result of BMW Finance's compliance failures, and will ensure appropriate remediation.
“BMW Finance will also remove default listings and buy back all debt sold to third parties to ensure that the written-off loans are not subject to further collections activities,” the regulator said.
“The program will be overseen by an independent remediation consultant, who will periodically report to ASIC on its progress and BMW Finance's compliance with the program.”
ASIC chairman Peter Kell said BMW Finance had a “sales-driven culture” that failed to comply with the requirements of the credit laws and resulted in “poor outcomes for many consumers”.
“We are encouraged that BMW Finance has recognised these shortcomings and agreed to a remediation program that will see thousands of consumers compensated,' Mr Kell.
“This is an example of the staggering cost of poor business practices and should act as a warning to other car financiers to get their houses in order,” he said.
ASIC has also amended BMW Finance's Australian Credit Licence to extend an external consultant's oversight of BMW Finance until the end of 2017 and introduce 'live review' testing of credit applications.
[Related: BMW Finance pays $391,000 for NCCP breach]