Australian Securities & Investments Commission issues action letters to car finance lenders after review finds weak distributor oversight and establishment fees up to AUD 9,000

The Australian Securities & Investments Commission (ASIC) published preliminary findings from its ongoing review of Australia’s motor vehicle finance sector, flagging problematic sales tactics and gaps in some lenders’ oversight of brokers and dealerships that arrange loans. ASIC has issued tailored action letters to participating lenders with recommendations to address the consumer harm risks identified. The review found significant variation in loan establishment costs, including cases where establishment fees reached AUD 9,000 on a AUD 49,000 loan. ASIC also reported that almost half of consumers who defaulted did so within the first six months, and that for repossessed vehicles sold, nearly 90% of consumers still owed more than half of the original loan amount. Areas for improvement include stronger training, accreditation and oversight of distribution channels, enhanced product review triggers and risk frameworks using consumer harm indicators and dispute data, improved communications during hardship arrangements including information on voluntary surrender options, and stronger governance of intermediary brokers and dealers; lenders in scope included Australian Alliance Automotive Finance, Angle Auto Finance, Latitude Automotive Financial Services, Nissan Financial Services Australia, Pepper Asset Finance, Plenti Finance, Rapid Loans and Toyota Finance Australia (including PowerTorque Finance). ASIC will continue probing the drivers of cost differences and early repayment stress, with detailed findings and lenders’ responses due in 2026, and noted it will take enforcement action where appropriate.