The Government’s decision to abolish the point of sale exemption for retail dealers providing car finance has come as a surprise to the new car industry.
The Banking Royal Commission handed down its report today recommending the removal of the exemption of retail dealers from the operation of the National Consumer Credit Protection Act (NCCP Act). Simultaneously, the Government issued its reponse to the report and accepted this recommendation.
“I am surprised given the point of sale exemption was only briefly mentioned in the Royal Commission’s interim report and suddenly, its abolition is now Government policy,” said AADA CEO David Blackhall.
“It is unclear what this policy will mean for the provision of finance at dealerships. It is not certain how many new car Dealers already have credit licences, but we do know that many mid-to-small and regional dealerships do not,” he said.
“I appreciate the Government’s commitment to carefully consider how this reform is implemented. The AADA will make ourselves available to work with the Government to ascertain the impact this will have on Dealers and to ensure that the transition is as smooth as possible,” he said.
“Leadership in this area is with the finance providers and we look forward to working with them to ensure that financiers, Dealers and consumers are not disadvantaged during this transition,”he said.
“It is unclear why the exemption needs to go. Obtaining finance from a dealership is a cost effective, convenient solution for many consumers and the Royal Commission by its own admission repeatedly said that delinquencies in the car finance market are very low,” he said.
The Government has also agreed to changes in the sale of add-on insurance products by Dealers, including working towards a deferred sales model and the imposition of a cap on the amount of commission paid to vehicle Dealers.
“The concept of a deferred sales model is already under consideration by ASIC. We will be urging Treasury to adopt a model which defers the sale for around three to four days and allows informed consumers a waiver,” Blackhall said.
“Allowing ASIC to impose a cap on add-on insurance commissions will only formalise a practice already being employed by the main insurance companies,” Blackhall said.
There will also be a review on commissions for general insurance and consumer credit insurance to test whether the exemption to the ban on conflicted remuneration remains justified, which the AADA looks forward to participating in.