More than 30,000 car owners will be paid back over $15 million following an ASIC review into the financing of tyre and rim insurance premiums.
The National Credit Code allows the financing of premiums for only one year. Financing of car insurance premiums for more than a year can lead to customers paying undue interest on premiums and being unfairly locked into longer contracts with one insurer.
ASIC’s industry-wide review found improper financing of tyre and rim insurance premiums by some of Australia’s largest car financiers.
The review was prompted after BMW Australia Finance Ltd notified ASIC after it breached the National Credit Code for the same offence and subsequently refunded a total of $1,392,667 to 2466 customers.
The car financiers reviewed have put in place steps to refund the money. ASIC acknowledges their help in responding to this issue.
‘These businesses were quick to respond once it was brought to their attention,’ ASIC Deputy Chairman Peter Kell said. ‘We acknowledge the high degree of cooperation of the car finance industry in bringing about this important result for consumers.’
The car financiers will also change their systems and practices to prevent further breaches of the National Credit Code.
‘We look forward to seeing an ongoing improvement in compliance in the car finance sector,’ Mr Kell said. ‘However, if we find that there are car financiers that have failed to respond to this issue, we will act quickly and decisively with strong regulatory action.’
Tyre and rim insurance provides cover to car owners for damage to tyres, including punctures or blowouts. It also provides cover if a vehicle’s rims are damaged. This type of damage is not commonly included in standard comprehensive motor vehicle policies.
As part of the review ASIC asked car finance providers to examine their funding of tyre and rim insurance premiums and encouraged them to come forward if they identified breaches of the National Credit Code (and its predecessor, the Uniform Consumer Credit Code). Working with the Australian Finance Conference, ASIC asked businesses to put in place a process for identifying and refunding affected consumers, and procedures and controls to ensure this conduct does not happen again.
Customers who have not received a refund are encouraged to contact the relevant entity on the telephone number listed in this ASIC table.