A lender that provides finance for second-hand cars will pay more than $11 million to address concerns about its lending practices.
The financial services regulator, ASIC, announced that Motor Finance Wizard had signed an enforceable undertaking after an ASIC probe revealed it “failed to meet its responsible lending obligations”.
ASIC said its probe found that Motor Finance Wizard failed to “make reasonable inquiries about consumers’ income and expenses” and failed to “take reasonable steps to verify consumers’ expenses”.
Motor Finance Wizard will now provide more than $11 million in refunds and write-offs to 1,511 customers who signed a consumer lease or loan between 1 July 2010 and 16 July 2014.
Motor Finance Wizard will also have to reassess each customer’s capacity to repay their lease or loan under a program overseen by an independent auditor.
The lender will also have to give customers the option to terminate their lease or loan.
ASIC aims to protect consumers
ASIC launched its probe because it was concerned that instead of making actual inquiries about a consumer’s living expenses, Motor Finance Wizard relied on an in-house benchmark to determine the consumer’s capacity to make payments under the consumer lease or loan.
“This benchmark did not have any connection to the actual expenses of the consumer and was unrealistically low,” the regulator said.
Responsible lending rules oblige lenders to make proper inquiries into borrowers’ capacity to repay loans to prevent them signing up for loans they can’t afford.
ASIC said it has a particular focus on the responsible lending laws, as these are key consumer protection provisions.
Consumers who believe they may have entered into an unsuitable consumer lease or loan with Motor Finance Wizard can contact the lender on 13 22 75.