ASIC has announced that BMW Australia Finance Limited will refund 2,466 customers a total of $1,392,667 following its breach of the National Credit Code.

In 2011, BMW Finance notified ASIC that it had been extending credit to car buyers to pay for tyre and rim insurance premiums where the period of that insurance was for three years.

Section 144 of the National Credit Code prohibits lenders financing the premium on insurance taken out by the debtor over mortgaged property for a period of insurance exceeding 1 year, but may provide credit for or finance successive premiums for periods of 1 year or less.

As a result of this breach, ASIC is undertaking an industry-wide review of the financing of tyre and rim insurance premiums to ensure compliance with the National Credit Code and its predecessor the Uniform Consumer Credit Code. Tyre and rim insurance provides cover to car owners for damage to tyres, including punctures or blowouts. It also provides cover if a vehicle’s rims are damaged. This type of damage is not commonly included in standard comprehensive motor vehicle policies.

BMW Finance has implemented a process to refund the financed premiums for customers, whilst allowing the consumers to retain the benefit of the policy.