A motor financing company is to pay more than $11 million in refunds and write-offs after failing to meet responsible lending obligations.
The Australian Securities & Investments Commission (ASIC) undertook a probe, which found that Motor Finance Wizard failed to “make reasonable inquiries about consumers’ income and expenses [and] to take reasonable steps to verify consumers’ expenses”.
The ASIC investigation found that, between 1 July 2010 and 16 July 2014, the company used an internally-generated benchmark to ascertain the consumer’s ability to make repayments on loans and leases for second-hand cars, rather than conducting an actual investigation into the consumer’s living expenses.
“This benchmark did not have any connection to the actual expenses of the consumer and was unrealistically low,” ASIC said.
Branches at Kedron, St. Marys, Slacks Creek, Klemzig, Maidstone and Dandenong were implicated in the findings.
Following the findings, Motor Finance Wizard has signed an enforceable undertaking to provide more than $11 million in refunds and write-offs to 1,511 customers who entered into a lease or loan between the specified dates.
Motor Finance Wizard is also required to make a $100,000 payment to a community benefit program funding consumer initiatives.
An independent expert will review the company’s current operations and report to ASIC, while an independent auditor reporting to ASIC will oversee Motor Finance Wizard as the company re-assesses each consumer’s ability to make lease or loan payments under a remediation program.
Affected customers have the option to terminate the lease and should they elect to keep the lease will be allowed to keep the car at the end of the lease term.
ASIC deputy chair Peter Kell said: "Our responsible lending rules are clear: Licensees must make proper inquiries into each customer's capacity to repay a consumer lease or loan."
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