ASIC has announced that the Motor Finance Wizard group of companies (MFW) has signed an enforceable undertaking, will pay over $11 million in refunds and write-offs and will implement a wide-ranging remediation program, after an ASIC investigation revealed it failed to meet its responsible lending obligations during the period from 1 July 2010 to 16 July 2014.
MFW provides consumer leases and loans for second-hand cars across Australia’s east coast.
ASIC was concerned that MFW failed to make reasonable inquiries about consumers’ income and expenses and to take reasonable steps to verify consumers’ expenses.
MFW’s financial capacity assessment of borrowers was based on their bank statements and a benchmark for expenses plus disclosed liabilities. ASIC found expenses such as transport, childcare and utilities may not have been included in the verification methodology.
In some cases the periodic repayments was close to the customer’s calculated capacity.
ASIC has accepted an enforceable undertaking from MFW, which includes:
- over $11 million in refunds and write-offs to 1,511 customers who entered into a consumer lease or loan between 1 July 2010 and 16 July 2014
- $100,000 payment to a community benefit program funding consumer initiatives
- re-assessing each consumer’s capacity to make payments under the consumer lease or loan under a remediation program overseen by an independent auditor who will report to ASIC
- giving affected consumers the option to remain in or terminate the consumer lease or loan
- allowing consumers to keep the car at the end of the lease term, if they elect to keep the lease
- engaging an independent expert to review its current business operations and compliance with the consumer credit regime and report to ASIC
MFW will complete the remediation program within nine months.
Watch my video on verifying borrowers’ expenses.
