More than 30,000 car owners are to be refunded more than $15m after an ASIC investigation into tyre and rim insurance premium financing.
The ruling came after ASIC carried out an industry-wide review into the improper financing of tyre and rim insurance premiums by some of Australia's largest car financiers.
The National Credit Code allows the financing of premiums for just one year. ASIC argues that financing of car insurance premiums for more than a year can lead to customers paying undue interest on premiums and being unfairly locked into longer contracts with one insurer.
The review was prompted after BMW Australia Finance notified ASIC that it had breached the National Credit Code and subsequently refunded nearly $1.4m to 2,466 customers. The car financiers reviewed have put in place steps to refund the money.
“These businesses were quick to respond once it was brought to their attention," ASIC Deputy Chairman Peter Kell said. ‘We acknowledge the high degree of cooperation of the car finance industry in bringing about this important result for consumers.’
The car financiers will also change their systems and practices to prevent further breaches of the National Credit Code.
‘We look forward to seeing an ongoing improvement in compliance in the car finance sector,’ Mr Kell said. ‘However, if we find that there are car financiers that have failed to respond to this issue, we will act quickly and decisively with strong regulatory action.’
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.