ASIC announces ban on flex commissions
ASIC has recently announced it will prohibit ‘flex commissions’ in the car finance market.
On 3 March 2017, ASIC published its Consultation Paper 279: Flex commission arrangements in the car finance industry (Consultation Paper) calling for submissions in response to the Consultation Paper by Monday 27 March 2017.
ASIC is currently planning amendments to the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) in order to ensure lenders (and not the car dealers’ finance managers) will be responsible for setting the interest rates to be applied to loans and the commissions paid to the car dealers will not be linked to these interest rates. However, ASIC is proposing to allow a limited capacity for car dealers to discount the interest rates and receive lower commissions.
ASIC is proposing that a transition period be implemented to enable lenders to develop different pricing models, and for lenders and car dealers to negotiate new commission models. At this stage, ASIC’s draft instrument sets a commencement date for the ban on flex commissions of 1 September 2018.
At Macpherson Kelly, we have helped many organisations to comply with their obligations under the NCCP Act. If you would like further information on ASIC’s proposed amendments to the NCCP Act or the process of responding to its Consultation Paper, please contact Kelly Dickson on (03) 9794 2541.