Motor Finance Wizard has signed an enforceable undertaking, and will implement a wide-ranging remediation program, after an ASIC probe revealed it failed to meet its responsible lending obligations.

Motor Finance Wizard provides consumer leases and loans for second-hand cars across Australia's east coast.

The ASIC probe found that Motor Finance Wizard failed:

• to make reasonable inquiries about consumers' income and expenses
• to take reasonable steps to verify consumers' expenses.

ASIC has accepted an enforceable undertaking from Motor Finance Wizard, which includes:

• over $11 million in refunds and write-offs to 1,511 customers who entered into a consumer lease or loan between 1 July 2010 and 16 July 2014
• $100,000 payment to a community benefit program funding consumer initiatives
• re-assessing each consumer's capacity to make payments under the consumer lease or loan under a remediation program overseen by an independent auditor who will report to ASIC
• giving affected consumers the option to remain in or terminate the consumer lease or loan
• allowing consumers to keep the car at the end of the lease term, if they elect to keep the lease
• engaging an independent expert to review its current business operations and compliance with the consumer credit regime and report to ASIC

"Our responsible lending rules are clear: Licensees must make proper inquiries into each customer's capacity to repay a consumer lease or loan," ASIC Deputy Chair Peter Kell said.

"Otherwise customers could end up signing up for a loan or lease they simply cannot afford."

Motor Finance Wizard will begin to contact affected consumers shortly with the remediation program to be completed within nine months.

Consumers who believe they may have entered into a consumer lease or loan with Motor Finance Wizard that was unsuitable can also contact them on 13 22 75.

• Download the Enforceable Undertaking

Background

Between 1 July 2010 and 16 July 2014, Motor Finance Wizard traded across the following entities:

1. Affordable Car Loan Pty Ltd (ACN 098 491 484) (trading as MFW Kedron)
2. DTGN1 Pty Ltd (ACN 099 333 132) (trading as MFW St. Marys)
3. DTGQ1 Pty Ltd (ACN 096 676 596) (trading as MFW Slacks Creek)
4. DTGS1 Pty Ltd (ACN 124 197 119) (trading as MFW Klemzig)
5. DTGV1 Pty Ltd (ACN 117 890 098) (trading as MFW Maidstone and MFW Dandenong)

During that time, each entity, except for DTGS1 Pty Ltd (ACN 124 197 119), offered consumer leases. From around November 2013, each Motor Finance Wizard entity also offered loan contracts.

ASIC was concerned that instead of making actual inquiries about a consumer's living expenses, Motor Finance Wizard relied on an internally-generated benchmark to determine the consumer's capacity to make payments under the consumer lease or loan.

This benchmark did not have any connection to the actual expenses of the consumer and was unrealistically low.

ASIC's Regulatory Guide 209 Credit licensing: Responsible lending conduct was updated in November 2014, and reflects the Federal Court decision in ASIC v The Cash Store (in liquidation) [2014] FCA 926.

Customers can find out if they are due a refund or write-off from Motor Finance Wizard by visiting ASIC's MoneySmart website. The website also has useful information on car leases and loans and the new MoneySmart Cars app that helps you work out the real cost of buying a car.

ASIC’s responsible lending work

ASIC has a particular focus on the responsible lending laws, as these are key consumer protection provisions. Some outcomes are listed below:

• BMW Finance will pay $77 million in Australia's largest consumer credit remediation program following ASIC's concerns that BMW Finance failed to comply with its responsible lending obligations (refer: 16-417MR).
• Cash Converters will refund $10.8 million to small amount loan customers after ASIC found systemic failures in its responsible lending processes. Cash Converters also paid a $1.35 million penalty following the issue of infringement notices by ASIC (refer: 16-380MR).
• The Federal Court found that Cairns-based car yard lender and broker (Channic Pty Ltd, broker Cash Brokers Pty Ltd and the sole director of both companies, Mr Colin William Hulbert), breached consumer credit protection laws when they provided loans to vulnerable indigenous consumers for the purchase of second hand cars (refer: 16-335MR).
• Nimble refunded $1.5 million to consumers after concerns were identified with their responsible lending practices (refer: 16-189MR).
• Westpac car financier, Capital Finance, paid $493,000 for breaching consumer protection repossession laws (refer: 16-106MR).
• Westpac paid $1 million following ASIC's concerns about credit card limit increase practices (refer: 16-009MR).
• Bank of Queensland Limited improved its lending practices following ASIC's concerns about the way it assessed applications for home loans (refer: 15-125MR).
• The Federal Court of Australia awarded $18.975 million in civil penalties against The Cash Store Pty Ltd and Assistive Finance Australia Pty Ltd for their failure to comply with responsible lending obligations (refer: 15-032MR).
• Wide Bay Australia Ltd (now Auswide Bank Ltd) made changes to their responsible lending policy as a result of ASIC's intervention (refer: 15-013MR).
• Abaz Pty Ltd paid an infringement notice for failing to obtain and consider bank statements as required by the legislation (refer: 14-313MR).