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BMW credit companies suffer huge penalties in Australia

BIScom Subsection: 
Editorial Staff

More than 15,000 customers of BMW Financial Services, Mini Financial Services and Alphera Financial Services are to be compensated for serious failures in the group's business practices, which caused genuine hardship in some cases, says the Australian regulator, ASIC. The scale of the Order is jaw dropping.

The companies have entered into enforceable undertakings (and therefore avoided prosecution) to make payments of at least AUD72 million in redress to consumers. The payments are at least the following amounts:

* $14.6 million in remediation payments;
* $7.6 million in interest rate reductions on current contracts; and
* $50 million in loan write offs.

'BMW Finance had a sales-driven culture that failed to comply with the requirements of the credit laws and resulted in poor outcomes for many consumers, said ASIC Deputy Chairman, Peter Kell, announcing the penalties.

There are 15,000 known victims who will receive direct communication from the companies - but ASIC says that anyone who thinks they have been a victim should make contact and claim.

ASIC has also amended BMW Finance's Australian Credit Licence to extend an external consultant's supervision of BMW Finance until the end of 2017 and introduce 'live review' testing of credit applications.

The Remediation Programme

The Programme is designed to provide consumer redress where BMW Finance is likely to have caused hardship as a result of its failure to comply with its responsible lending obligations. Hardship can take many forms and may not have solely occurred in the consumer's loan. For example, hardship may have materialised in the consumer's other liabilities, such as their home loan and/or credit card.

BMW: www.bmw.com.au/financeremediat...
Alphera: www.alphera.com.au/financereme...
MINI: www.mini.com.au/financeremedia...
Moneysmart: www.moneysmart.gov.au/tools-an...

Extended supervision of BMW Finance's lending business

In addition to the EU, BMW Finance has had conditions placed on its Australian credit licence (credit licence). In January 2016, BMW Finance had an external compliance consultant condition (the condition) placed on its credit licence following concerns raised by ASIC. The consultant is required to conduct a review of, and report to ASIC on, BMW Finance's policies and procedures on a quarterly basis over 12 months to ensure compliance with consumer credit laws.

As a result of the serious concerns raised in the consultant's first report, the condition has been extended until the end of 2017. Among other things, the condition requires the consultant to:

'live' review a sample of applications for credit, prior to credit being offered, to prevent further consumer harm and to ensure BMW Finance's ongoing compliance with its responsible lending obligations, and
review a sample of current credit contracts (entered into prior to the 'live' review) for compliance with BMW Finance's responsible lending obligations and debt collection activities.

It's not ASIC's first time in dealing with BMW Finance.

ASIC has taken a number of regulatory actions in relation to BMW Finance's lending and collections activities:

In January 2015, ASIC issued 36 infringement notices (INs) to BMW Finance totalling AUD306,000 after finding that it breached consumer protection provisions relating to the repossession of motor vehicles (refer 15-037MR).
In January 2016, ASIC placed a condition on BMW Finance's licence requiring it to appoint an independent compliance consultant to conduct a review of, and report to ASIC on BMW Finance's operations on a quarterly basis over 12 months.
In February 2016, ASIC issued 22 INs to BMW Finance totalling AUD391,000 after finding that it breached consumer protection provisions relation to the repossession of motor vehicles and responsible lending breaches (refer 16-019MR).