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BMW Finance hit by $77 million ASIC slug

Payback: As part of the agreement, BMW Finance is required to pay $5 million to help fund “consumer advocacy and financial literary activities”.

Irresponsible lending practices by BMW Finance results in massive payout

General News logo6 Dec 2016

BMW Finance will be forced to refund $72 million to loans customers after the Australian Securities and Investment Commission (ASIC) found that the German car-maker breached responsible lending guidelines.

ASIC said in a press release this morning that BMW Finance will “implement Australia’s largest consumer credit remediation” as a means to compensate customers it says were misled by irresponsible lending practices.

An investigation by Fairfax Media earlier this year alleged that BMW was approving large loans to buyers who were not in a financial position to repay the loans, with some lendees having zero or negative disposable income.

ASIC says the $72 million remediation program is open to BMW Financial Services, Mini Financial Services and Alphera Financial Services customers.

It will be made up of $14.6 million in remediation payments, $7.6 million in interest rate reductions on current contracts and $50 million in loan write-offs.

Under the program, BMW has agreed to an additional “community benefit” payment of $5 million that will go towards consumer advocacy and financial literary activities, bringing the total BMW will pay to $77 million.

ASIC says the program will “ensure appropriate remediation” for the 15,000 customers who, between January 2011 and August 2016 may have suffered some hardship as a result of BMW Finance’s actions.

The agreement with ASIC also states that BMW Finance will remove default listings and purchase back all debt sold to third parties to make sure that written-off loans are not in danger of being subject to further collections actions.

An independent remediation consultant will oversee the program and report to ASIC on BMW Finance’s compliance.

ASIC deputy chairman Peter Kell detailed BMW Finance’s failures and said the finding sounded a warning to other in-house finance companies operating in Australia.

“BMW Finance had a sales-driven culture that failed to comply with the requirements of the credit laws and resulted in poor outcomes for many consumers,” he said. “We are encouraged that BMW Finance has recognised these shortcomings and agreed to a remediation program that will see thousands of consumers compensated.

“This is an example of the staggering cost of poor business practices and should act as a warning to other car financiers to get their houses in order.” While BMW Finance will contact customers who have been impacted, customers who had a loan within the above timeframe and believe they have suffered hardship can contact the company and register for the program.

In February this year, ASIC fined BMW Finance $391,000 and placed a condition on its credit licence stating that it must appoint an auditor to oversee its activities for 12 months over 22 infringements.

That followed the original finding back in February 2015, when ASIC discovered 36 infringements and fined the German car-maker $306,000.

GoAuto is awaiting comment from BMW Group Australia.

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