The regulator has flagged risky distributor conduct, steep fees, and weak hardship support in a fresh review of car loans as it demands tougher controls.
Australia’s corporate regulator has delivered a blistering critique of the car finance market, warning lenders that they cannot outsource responsibility for consumer outcomes to brokers and dealers after a review uncovered sharp fee structures, wide rate spreads, and serious gaps in hardship support.
The review draws on more than 350,000 loans from eight major providers across the new and used car market, focusing on how credit is sold through broker networks, aggregators, and car yards.
ASIC’s core message is that lenders have built their businesses around intermediaries but have not matched that model with robust oversight of how those intermediaries behave.
“Lenders must keep consumers front of mind and ensure that they have processes and oversight across their business, including their distributors, to support positive consumer outcomes,” ASIC commissioner Alan Kirkland said.
Kirkland said that accountability could not be pushed down the chain.
“Lenders should be monitoring the experiences of borrowers, especially where loans are sold by third parties like dealers or brokers. Responsibility for consumer outcomes cannot be outsourced,” he said.
Prices, fees, and the depth of borrower harm
ASIC’s analysis showed that borrowers taking out car finance could face a wide array of costs for broadly similar products.
Rates in the sample ranged from 10–22 per cent, with most loans including a lender establishment charge alongside a separate distributor fee.
ASIC said one customer borrowing $49,162 paid more than $9,000 in fees, including over $7,800 to the lender and $1,320 to the broker – around 18 per cent of the total loan amount.
Similar examples included $9,154 in establishment fees on a $49,162 loan and $5,002 in fees on a $52,646 loan.
The regulator also found that hardship treatment varied widely, with some customers receiving more constructive assistance than others.
Among borrowers whose cars were repossessed and sold, most were left with substantial residual debts.
In a review of 250 such loans, 90 per cent of consumers still owed more than half of their total loan amount and, in some cases, more than they originally borrowed.
Kirkland said these outcomes went to the heart of suitability and affordability.
“If a large proportion of customers are falling behind on repayments early, it raises serious questions about whether those loans were appropriate in the first place and how lenders conduct their affordability checks,” he said.
The review also identified significant geographic differences in how hardship is handled.
Borrowers in regional and remote areas were less likely to have hardship variations approved than borrowers in other locations.
Kirkland underscored the broader social implications of this and said: “Australians shouldn’t be at risk of financial harm simply because they need a car to get to school, work and essential services.”
ASIC’s reform agenda for car finance
ASIC went on to set out a reform path that reached into product design, distribution, and hardship.
The regulator said it wanted clearer, more informative target market determinations that spelt out who each car finance product was designed for and how it should be sold.
It also called for a clampdown on problematic sales behaviour, including high‑pressure tactics and situations where a borrower’s objections to a particular type of finance are brushed aside.
Governance and monitoring were central to the proposed changes.
ASIC urged lenders to strengthen oversight frameworks for brokers and dealers, set more detailed distribution conditions, and actively check that intermediaries were complying with conditions.
On the hardship side, ASIC recommended more consistent policies and clearer communication about options such as voluntary surrender and time‑to‑sell arrangements.
The report said that all eight lenders involved had already started making changes, including improving hardship processes and tightening distribution controls.
Kirkland describes this as a positive first step but warned that more work was needed.
“This review lays bare the potential risks when lenders fail to effectively monitor third-party distributors, and how consumers can pay the price,” he said.
[Related: Vehicle buying plans stall as brokers reveal demand shift]
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