The corporate regulator’s ban on flex commissions in the car finance industry has officially commenced.
The Australian Securities and Investments Commission (ASIC) has announced that, as of today (1 November), its ban on flex commissions paid by lenders to car dealers and finance brokers for car loans has commenced.
ASIC initially implemented the ban by registering a legislative instrument on the Federal Register of Legislative Instruments in September 2017 through its powers under the National Consumer Credit Protection Act 2009.
ASIC has claimed that flex commissions could encourage car dealers and finance brokers to arrange car loans at the highest possible interest rate, noting that the higher the interest rate, the larger the commission earned by the dealer or broker.
ASIC commissioner Danielle Press said: “We found that flex commissions resulted in consumers paying very high interest rates on their car loans.
“We were particularly concerned about the impact on vulnerable consumers less able to protect their interests.”
ASIC stated that it expects the ban to improve lending practices as:
Ms Press added that the ban on flex commissions would deliver “better outcomes for consumers across the entire car finance industry” and that lenders have had “ample time” to prepare for the ban and that ASIC “expect[s] to see full compliance from 1 November”.
ASIC warned that lenders who do not comply will face penalties of up to $420,000 per contravention, and it said that it would begin monitoring lenders to “ensure they are complying and the prohibition is operating as intended”.
[Related: ASIC formally bans flex commissions]
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