Car flex commissions banned
The corporate regulator has used a legislative instrument to formally ban flex commissions in the car finance market.
The Australian Securities and Investments Commission (ASIC) has banned these commissions because it found that they led to consumers paying excessive interest rates on their car loans. The ban comes after the regulator proposed to use its statutory power to modify provisions of the National Credit Act to prohibit the use of flex commissions in March.
Flex commissions are paid by lenders to car finance brokers (typically car dealers), allowing the dealers to set the interest rate on the car loan. The higher the interest rate, the larger the commission earnt by the dealer.
ASIC deputy chair, Peter Kell, said: “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,” he said.
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