David Blackhall

THE Australian Automotive Dealer Association (AADA) has thrown its full weight behind actions by Australia’s corporate watchdog to enforce strict fines over illegal credit activities by car retailers.

AADA CEO David Blackhall said the recent action by the Australian Securities and Investments Commission (ASIC) to ban an operator from engaging in credit activities is a clear indication ASIC will not tolerate any illegal business practices.

Mr Blackhall was commenting on a case involving Adam Edward Greene who wrote and submitted loans for customers buying vehicles from a Cranbourne Victoria used-car dealership, Combined Motor Traders, between 2014 and 2015.

ASIC found that four loans submitted by Greene and approved by Esanda, then a division of ANZ, contained false information and that two of those loans contained false documents that were not given to him by the applicants.

Mr Blackhall said the AADA fully supports ASIC taking this action because it sends a strong message to car dealers around Australia that if anyone breaks the rules, they will be severely penalised.

Recently a Cairns-based second-hand car dealer was fined $1.2 million by the Federal Court for being in breach of consumer credit laws, responsible lending practices, unconscionable conduct and unjust transactions.

In this case, the dealership was charging up to $990 to facilitate loans with 48 per cent interest for unreliable second-hand cars through the dealership’s own cash broking company.

“These are the very people we want to see banned from this industry and we will have no hesitation to report any form of illegal practices to ASIC,” Mr Blackhall said.
Neither of those miscreants were members of the AADA, all of whom are new-car franchise dealers.

Greg Medcraft

The latter are governed by a strict set of regulations under their franchise agreements that are carefully monitored by manufacturers that have systems in place designed to detect anything questionable.

Commenting on the Greene case, ASIC’s Deputy Chairman Peter Kell said it was not the first time ASIC has identified this type of conduct with car loans and warned lenders to be careful at the way they manage the approval of these types of loans, including the way in which car yard employees provide assistance to consumers to obtain finance.

He said if lenders’ commission structures are encouraging illegal practices, they should make changes.

Car dealerships may operate under an exemption commonly known as the ‘point of sale’ exemption. It allows a car dealership to provide assistance to consumers to obtain finance from licensed credit providers.

The proceeds of the finance can only be used to pay for goods and services supplied by the dealership.

ASIC has taken action against other loan-writers, representatives or brokers operating in the car finance market, for conduct such as:

Obtaining cars for consumers with poor credit histories, by arranging for a third party to sign the loan contract as a borrower (when that person thought they were only a guarantor).

Arranging for the consumer to buy a car at an inflated sale price, and obtaining a secret profit from the markup in price.

Financing insurance and warranty products without the knowledge or consent of the consumers.

These cases include the permanent banning of four brokers from Perth-based Get Approved Finance for actions in 2012 and 2013. The bans were placed on Eric-John Pryor, Lachlan McDonald, Julie Vanzyl and Grant Parker. ASIC also banned another broker from the same company, Ms Rana Hepi, for eight years.

In October 2015 Esanda agreed to compensate more than 70 borrowers for car loans organised by Get Approved Finance. The total value of the loans financed was more than $1.38 million.

By Neil Dowling and Daniel Cotterill