ASIC crackdown on car dealer commissions

The corporate cop has slapped a ban on lucrative flex commissions paid to car dealers that encourages them to set exorbitant interest rates on loans.

The Australian Securities and Investments Commission has registered a legislative instrument to ban these commissions.

Flex commissions allow dealers to set the interest rate on the car loan. The higher the interest rate, the larger the commission earned by the dealer.

ASIC is banning these flex commissions because it found consumers end up paying excessive interest rates on their car loans, making huge money for dealers.

Under the legislative instrument, the lender, and not the car dealer, will have responsibility for determining the interest rate that applies to a particular loan.

The car dealer won’t be allowed to suggest a different rate that earns them more commissions and will have a limited capacity to discount the interest rate and receive lower commissions, leading to lower costs for credit.

“We found that flex commissions resulted in consumers paying very high interest rates on their car loans. We were particularly concerned about the impact on less financially experienced consumers,’ ASIC Deputy Chair Peter Kell said.



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