CEO of the Australian Automotive Dealer Association (AADA) David Blackhall said the recent action by the Australian Securities and Investments Commission (ASIC) to ban an operator from engaging in credit activities is a clear indication ASIC will not tolerate any illegal business practices
Mr Blackhall was commenting on a case involving Adam Edward Greene who wrote and submitted loans for customers buying vehicles from a Cranbourne used car dealership Combined Motor Traders, between 2014 and 2015.
ASIC found that four loans submitted by Greene and approved by Esanda, a division of ANZ, contained false information and that two of those loans contained false documents that were not given to him by the applicants.
Mr Blackhall said the AADA fully supports ASIC taking this action because it sends a strong message to car dealers around Australia that if anyone breaks the rules, they will be severely penalised.
Recently a Cairns-based second-hand car dealer was fined $1.2 million by the Federal Court for being in breach of consumer credit laws, responsible lending practices, unconscionable conduct and unjust transactions.
In this case, the dealership was charging up to $990 to facilitate loans of 48 per cent interest for unreliable second-hand cars through the dealerships own cash broking company.
“These are the very people we want to see banned from this industry and we will have no hesitation to report any form of illegal practices to ASIC,” he said.
Mr Blackhall said in both cases, neither were members of the AADA, all of whom are new car franchise dealers.
The main difference between a new car franchise dealer and an independent used car dealer is that new car dealers are governed by a strict set of regulations under their franchise agreements that are carefully monitored by manufacturers.
Manufacturers have systems in place that would immediately detect anything questionable.
Commenting on the Greene case, ASIC’s Deputy Chairman Peter Kell said this was not the first time ASIC has identified this type of conduct with car loans and warned lenders to be careful at the way they manage the approval of these types of loans, including the way in which car yard employees provide assistance to consumers to obtain finance.
He said if lenders’ commission structures are encouraging illegal practices, they should make changes.
Car dealerships may operate under an exemption commonly known as the ‘point of sale’ exemption (POS Exemption). The POS exemption allows a car dealership to provide assistance to consumers to obtain finance from licenced credit providers. The proceeds of the finance can only be used to pay for goods and services supplied by the dealership.
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