Australian Securities & Investments Commission identifies shortcomings in car finance distribution oversight and consumer outcomes

The Australian Securities & Investments Commission has published Report 832 on car loans after reviewing more than 350,000 loans across eight providers, finding weaknesses in lenders’ oversight of third-party distributors such as brokers and car dealers, sales practices, and monitoring of consumer outcomes. The review found that loan costs could vary sharply, with significant establishment fees, and that some consumers received inconsistent hardship support. It also found that when cars were repossessed and sold, many borrowers still owed substantial debt to the lender. ASIC found that loans typically carried two establishment fees, with lender fees ranging from AUD 299 to AUD 995 and distributor fees ranging from AUD 912 to as much as AUD 2,500. One lender also charged a third fee, with one customer paying more than AUD 9,000 in fees on a AUD 49,162 loan, equivalent to about 18% of the loan amount. In a sample of 250 loans involving repossession, 90% of borrowers still owed more than half of their total loan amount after the vehicle was sold, and some owed more than 100%. The review also found that borrower location and lender choice affected outcomes, with participating lenders approving a lower proportion of hardship variations in regional and remote areas. ASIC said its intervention has already led all eight participating lenders to improve hardship processes, while many have strengthened product distribution conditions, product review triggers, governance and oversight of high-volume distributors. It will continue to monitor the lenders involved and said it will take action where lenders or intermediaries fail to comply with legislative obligations.