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The regulator will examine the compliance of lenders, brokers, and other intermediaries in a review of the motor vehicle finance sector.
The Australian Securities and Investments Commission (ASIC) will launch a review into the motor finance sector this month, aiming to “drive better consumer outcomes, particularly for those living in regional and remote locations, including First Nations communities”.
In an announcement, the financial services regulator confirmed it would examine the compliance of lenders, brokers, and other intermediaries, with a focus on the management of loan defaults, hardship practices, and dispute resolution processes.
The review will cover the practices of seven lenders, according to ASIC, while pinpointing “opportunities for improvement across the sector”.
ASIC will also identify brokers and intermediaries to be included in the review as the project progresses, with the regulator saying it intends to take “enforcement action to protect consumers where appropriate”.
Used car finance sold to vulnerable consumers by finance providers was outlined as one of the key enforcement priorities for ASIC in 2025.
Misconduct impacting First Nations people is also an enduring enforcement priority for the regulator.
The first high-level insights from ASIC’s review are set to be published during the second half of 2025, followed by a “more detailed” public report.
The regulator said: “This project seeks to strengthen processes, practices and compliance across the car finance industry and address the potential for consumer harm.
“ASIC aims to improve the experiences of consumers, who are borrowing money to buy a car, particularly people residing in regional and remote locations, including First Nations peoples.”
Dealerships on notice
This latest announcement isn’t the first time ASIC has turned its focus to car finance in recent months.
Last September, the regulator launched proceedings against a dealership for allegedly providing hundreds of unlicensed car loans to consumers, many of whom paid “an excessive interest rate”.
The financial services regulator alleged that the dealership had provided finance to hundreds of consumers to purchase new and used vehicles, without holding an Australian Credit Licence (ACL).
When the proceedings were announced, ASIC deputy chair Sarah Court said: “ASIC is concerned that consumers with these loans were significantly overcharged and that their contracts missed key information. Consumers who apply for loans must be able to understand what they are paying for.
“Ensuring consumers are afforded the protections of the credit legislation remains a priority for ASIC. This is the first civil proceeding we have taken to address lending practices by car dealerships.
“Car dealers offering finance should be on notice that ASIC is looking closely at how they are operating.”
Under the microscope
This announcement comes after the financial services regulator released a new report earlier this month, outlining its findings from its recent review into lenders providing small amount credit contracts (SACCs) and their adherence to law changes in 2022 and 2023 under the Financial Service Reform Act 2022 (FSR Act).
According to the ASIC Report 805 Falling short: Compliance with the small amount credit contract obligations, while there has been a reduction in the number and total value of SAACs (loans of up to $2,000 with a loan term between 16 days and 12 months), the regulator is still concerned about the prevalence of unsuitable contracts.
Speaking after releasing the report on Thursday (13 March), ASIC commissioner Alan Kirkland said: “Consumers who access these products are often financially vulnerable. That’s why people who use small amount credit contracts are subject to additional protections.
“ASIC has a strong record of taking enforcement action in response to lending practices that cause harm to vulnerable consumers. Lenders are on notice that if we detect serious breaches of the law, we will consider taking further action.
“We were disappointed to uncover that some lenders may be seeking to shift consumers into other forms of credit, some of which involve greater risk.”
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