8th July, 2019 · Finance & Insurance Policy

Point-of-Sale Exemption

AADA Position

The AADA believes that the current system provides consumers with convenient and affordable car finance. We understand and support the intent of the Financial Services Royal Commission recommendations but believe that extensive consultation is required to get the best outcome for both consumers and new car Dealers.

The current system subjects Dealers to significant oversight from finance companies and, by and large, delinquencies in the car finance market are low. Should a stringent licensing scheme be implemented, it will result in duplication of process and increased compliance costs, which will be passed onto consumers. Smaller, regional Dealers will be particularly hard hit.

The AADA supports efforts to bolster responsible lending practices, but believes that this can be done in a manner that does not duplicate process or drive up costs for consumers.

Background

The final report from the Financial Services Royal Commission included a recommendation (Recommendation 1.7) that called for the abolition of the existing Point-of-Sale (POS) exemption for retailers (including new car Dealers) that act as “vendor introducers” to finance companies. In the case of new car Dealers this is for the provision of car loans for their customers. It is worth noting that the Royal Commission Reports included only one case study dealing with a car loan where a Dealer acted as introducer.

By abolishing POS, Dealers would be required to obtain a credit license or become an authorised credit representative. Both options would require duplication of process and increased compliance costs.

A survey of AADA members showed that very few have their own credit licence or are appointed as credit representatives for their finance providers. This means that the vast majority of new car dealerships throughout the country would be affected.

A rapid and unconsidered abolition of the POS exemption would likely be an existential threat for many small, mainly regional, new car Dealers that currently depend on the exemption. This is because of the relative importance of the ‘finance and insurance’ profit centre to their ongoing viability.