Since November 1 this year, the Australian Securities and Investments Commission’s (ASIC) ban on flex commissions has been in effect.
Lenders who do not comply with the new rules will face penalties of up $420,000 per contravention and ASIC will be monitoring lenders, ensuring that they are complying with the new rules.
ASIC’s introduced ban on flex commissions operates so:
Lenders, not car dealers have responsibility for determining the interest rate that applied to a particular loan.
The car dealer cannot suggest a different rate that earns them more commissions. They will have a limited capacity to discount the interest rate, but only to reduce the price so that it operates to benefit the consumer.
In particular, ASIC will be closely looking at the following:
Consumers should be offered an interest rate that is based on their financial position and credit score, rather than an ability to negotiate.
Consumers are more likely to be offered interest rates by car dealers that are competitive compared to what other lenders are providing.
Vulnerable consumers will not be charged high interest rates simply because they are not able to negotiate lower rates.To read ASIC’s media release, click here.