ASIC flags car loan fee and distribution risks in Australia

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Highlights

ASIC's Report 832 finds car loan establishment fees can reach A$9,000, totaling up to 18% of a A$49,162 loan for some consumers.
Among a sample of 250 repossessed car loans, 90% of borrowers still owed more than half the original amount, with some exceeding 100%.
Following ASIC's scrutiny, all eight surveyed lenders have committed to improving hardship support, distribution oversight, and governance, but sector-wide risks remain under watch.

Review findings on fees and lending practices

As reported by ASIC, its Report 832 reviews loan data from eight car finance providers and finds weaknesses in some lenders' oversight of third-party distributors such as brokers and car dealers. The regulator says those gaps can expose consumers to harm when responsibility for customer outcomes is not closely monitored by the lender itself.

ASIC says the total cost of car loans can vary widely, with fees particularly significant on lower-value borrowing. Loans typically carry two establishment fees, a lender fee of A$299 to A$995 and a distributor fee ranging from A$912 to as much as A$2,500.

One lender with the highest total fees across the loans reviewed also charges a third fee, with one customer paying more than A$9,000 in fees on a A$49,162 car loan. That amount includes more than A$7,800 to the lender and A$1,320 to the broker, about 18% of the total loan amount.

ASIC also says hardship support is inconsistent for some borrowers who fall behind, while many consumers whose cars are repossessed and sold still owe money to their lender. In a sample of 250 loans, 90% of consumers still owe more than half their total loan amount, and in some cases more than 100% of the loan amount.

Sector changes and consumer impact

Commissioner Alan Kirkland says a high share of customers missing repayments early raises questions about whether those loans are suitable in the first place and how affordability checks are being carried out. ASIC adds that a borrower's location and chosen lender can influence outcomes, with participating lenders approving a lower share of hardship variations in regional and remote areas than elsewhere.

The regulator says its intervention has already prompted changes across the sector. All eight participating lenders are improving hardship processes, while many are strengthening product distribution conditions, review triggers, governance and oversight of high-volume distributors to better detect and respond to consumer harm.

ASIC says more work is still needed across the car finance market and that it will continue to monitor lenders involved in the review. The regulator adds that it will take action where it identifies lenders or intermediaries failing to comply with legislative obligations.

Our earlier article on broker compensation in U.S. health insurance markets examined rising distribution costs and whether insurer-paid commissions are delivering value for consumers or creating misaligned incentives. It highlighted estimates that broker spending has climbed sharply—particularly in Medicare Advantage—prompting policy concerns about higher overall costs and weaker program integrity.

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ASIC flags car loan fee and distribution risks in Australia

Highlights

Review findings on fees and lending practices

Sector changes and consumer impact

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