Retailers surprised to be caught up in royal commission’s car dealer crackdownFebruary 15, 2019
Retailers offer finance options on purchases including appliances, jewellery and electronics. (ABC News: John Gunn.)
The banking royal commission exposed poor practices by some dealers signing customers up for car loans and now the recommended remedy could also hit the so-called interest-free deals offered by many retailers.
- The royal commission recommends removing the point-of-sale exemption, which allows car dealers and shops to offer finance without holding a credit licence
- The Motor Trades Association of Australia says a survey of one state found just eight of 68 dealers hold a credit licence
- The Government backed the recommendation but says it will consider the impact on businesses and consumers
Car dealers and shop assistants can currently offer loans or credit cards and help customers fill out the forms without holding a credit licence.
The ‘point-of-sale exemption’ contained in the National Consumer Credit Protection Act means a dealership or retailer does not need to hold a credit licence or comply with responsible lending obligations.
Instead, those legal responsibilities fall back on the bank or lender assessing and issuing the loan.
However, the final report of Kenneth Hayne’s year-long royal commission recommended abolishing the exemption — a move welcomed by consumer advocates.
“We think that when consumers are buying any products with finance, they really need to deal with the right experts,” said Amanda Storey from the Consumer Action Law Centre, describing the exemption as a “loophole” that needs to be closed.
“When you go to a car yard, car dealers are really good at selling cars but they don’t necessarily have the right expertise to recommend loan products or other expensive or complex financial products.”
Retailers ‘caught by surprise’
Car dealers were bracing for recommendations in the royal commission’s final report, having featured prominently in the public hearings, with evidence of exorbitant interest rates, loan applications filled out incorrectly and repayments not explained to customers.
However, another industry caught up in the potential crackdown was not expecting it, with the head of the Australian Retailers Association calling it a “rude shock”.
“I think it’s caught the whole industry by surprise,” Russell Zimmerman said.
In-store finance is prevalent among retailers that sell bigger ticket items such as appliances, electronics, jewellery or furniture.
Retailers from Harvey Norman and The Good Guys to Carpet Court and Snooze offer interest-free repayment plans to help take the initial sting off large purchases, such as white goods, furniture or electronics.