Car loan provider slugged $11m for lending violations

Car loan provider slugged $11m for lending violations

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

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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.

Other ASIC probes have resulted in BMW Finance paying $77 million, The Cash Store and Assistive Finance Australia paying $19 million and Cash Converters paying $12 million.

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.

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Learn more about car loans

What is a finance lease?

A finance lease, also known as an asset lease or car lease, is an arrangement by which a finance company buys a car on your behalf. You get to borrow the car in return for making regular payments to the financier. At the end of the lease, you can either buy the car or hand it back. 

What is an asset lease?

An asset lease, also known as a finance lease or car lease, is an arrangement by which a finance company buys a car on your behalf. You get to borrow the car in return for making regular payments to the financier. At the end of the lease, you can either buy the car or hand it back.

What is a finance broker?

Finance brokers help borrowers organise car loans with lenders – that is, they act as middlemen between borrowers and lenders. While lenders will only recommend their own products, finance brokers recommend products from a range of lenders. Finance brokers need to be accredited with a lender to do business with that lender; a typical broker will be accredited with between 10 and 30 lenders. Finance brokers generally don’t charge consumers; instead, they receive commission payments from lenders.

What is a car lease?

A car lease, also known as an asset lease or finance lease, is an arrangement by which a finance company buys a car on your behalf. You get to borrow the car in return for making regular payments to the financier. At the end of the lease, you can either buy the car or hand it back. 

What is vehicle finance?

Vehicle finance, also known as a car loan, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Vehicle finance can be used for both new and used vehicles.

What is dealer finance?

Dealer finance is a car loan organised through a car dealer – as opposed to car loans organised by a finance broker or directly by the lender.

How do you get a car loan?

There are four different ways you can get a car loan. You can go straight to a lender. You can get a finance broker to organise a car loan for you. You can get ‘dealer finance’ – which is when the car dealer organises a car loan for you. Or you can organise your own car loan through a comparison website, like RateCity.

Whichever method you choose, you will need to provide proof of identification, proof of income and proof of savings. So you may be asked for any combination of passport, driver’s licence, bank statements, payslips, tax returns and utility bills. You might also be asked to provide proof of insurance.

Where can I find car loans for single mothers?

Single mothers can sometimes find that due to their circumstances the bigger banks can be less inclined to lend to them, but there are smaller companies and specialist lenders who can be willing to provide loans to people in a range of circumstances.

Single mothers could benefit from getting in touch with a car finance broker, as a broker is likely to have knowledge and access to options that are suited to their needs.

Advantages to using a broker:

  • Finance brokers often don’t charge for their services as they work on a commission basis from lenders.
  • Brokers will have industry knowledge and contacts within lending companies and is therefore more likely to be able to find the best deal for your circumstances.
  • Brokers are qualified professionals who are licensed under the National Consumer Credit Protection Act so have an obligation to follow responsible lending practices and to work in your best interests.

Find car finance through a broker.

What are loan repayments?

Loan repayments are the regular payments you make to pay off your car loan. Loan repayments generally occur on a monthly basis, although many lenders will also give you the option of making fortnightly or weekly loan repayments.

Can I get a loan if I am on aged pension?

Yes, there are certain lenders that provide loans for people on aged pensions. Your viability for a loan will be assessed by a lender by your credit report and your income. They will also take into account any assets you have that you may want to secure the loan with. The better your credit score, the more likely you are to be accepted for a loan, and the lower the interest you will have to pay on that loan.  

If you have a bad credit rating and are on an aged pension however, don’t despair, because there are specialised lenders who still may be willing to provide you with a loan.

Can I get car finance on a pension?

 

Yes, as long as you meet basic criteria set out by lenders you are eligible for car finance. Your interest rate will be determined based on your financial history which can be found in your credit report, your income and any property you may own.

Comparing car loans for pensioners before you settle on one is important though, if you want to secure the best possible loan for your circumstances.

What is a car loan?

A car loan, also known as vehicle finance, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Car loans can be used for both new and used vehicles.

What is a loan term?

The loan term is the amount of time the lender gives you to repay the car loan. For example, if you take out a $20,000 car loan with a five-year loan term, you would be expected to pay off the entire $20,000 (plus interest) within five years.

I’ve been denied a car loan before; can I still get car finance?

Even if you’ve been denied a car loan before, you might still be able to get car finance. The key is to make the right application to the right lender.

The ‘right’ application is one that makes you look like an acceptable risk, which might include things like improving your credit score, increasing your savings rate and accumulating a bigger deposit.

The ‘right’ lender is one that deals with borrowers like you. For example, while some car loan lenders only deal with good credit borrowers, there are others that specialise in bad credit or poor credit borrowers.