ASIC REP 832: What Car Finance Providers Need to Know

In brief

ASIC’s Report 832, Lifting the bonnet: ASIC’s review of car loans, identifies significant indicators of consumer harm across a sample of more than 350,000 loans provided by eight lenders. The concerns were not confined to loan approval. They extended to product design, dealer and broker distribution, fees, vehicle valuation, early defaults, hardship, collections, repossession, complaints and board-level oversight.

The report is particularly important because ASIC has framed the issue as an end-to-end governance failure. A lender may use a dealer, broker, aggregator, outsourced servicer or collections provider, but it cannot outsource responsibility for consumer outcomes. Nor can a target market determination be treated as a static disclosure document. ASIC expects it to operate as a measurable control, informed by actual borrower outcomes and distributor-level data.

REP 832 does not make a finding that every participating lender breached the law, and ASIC said that its recommendations differed by lender. It does, however, establish a clear supervisory benchmark for the broader market. ASIC has stated that it will monitor implementation and take targeted action where lenders or intermediaries fail to comply.

Interactive Tool: Check Your Car Loan Compliance & ASIC Risk Level

What did ASIC review?

ASIC reviewed loans commenced between March 2023 and March 2025 by Australian Alliance Automotive Finance, Angle Auto Finance, Latitude Automotive Financial Services, Nissan Financial Services Australia, Pepper Asset Finance, Plenti Finance, Rapid Loans and Toyota Finance Australia, including PowerTorque Finance.

The review followed increased complaints to ASIC and reports from consumer advocates. It was led by ASIC’s Indigenous Outreach Program because many complaints concerned First Nations consumers, although ASIC emphasised that the findings apply to all consumers. The review examined the full customer journey, including:

• product features, target markets and distribution arrangements;
• loan pricing, interest rates and establishment fees;
• responsible-lending inquiries, verification, and assessment;
• vehicle valuation and the relationship between the loan amount and secured asset value;
• early and recurring repayment defaults;
• hardship applications, collections, complaints, and dispute resolution;
• repossession, sale of the vehicle and residual debt; and
• risk management, product-review triggers and governance reporting.

What did ASIC find?

Car-loan costs varied materially

Median interest rates among participating lenders ranged from 10% to 22%. Consumers generally paid both a lender establishment fee and a distributor establishment fee. Lender fees commonly ranged from $299 to $995, while distributor fees commonly ranged from $912 to $1,500 and, in some cases, up to $2,500. ASIC identified one customer who paid $9,154 in total establishment fees on a $49,162 loan.

The legal issue is not that price dispersion alone proves misconduct. ASIC expressly acknowledged that its direct remit over pricing is limited, subject to matters including the 48% annual cost cap, unfair contract term rules and sales disclosures. The conduct risk arises where fees are capitalised, poorly explained, inconsistent with the consumer’s needs, influenced by distributor incentives, or contribute to an unsuitable or unsustainable loan.

Product distribution controls were sometimes too general

All participating lenders relied predominantly on third-party distribution, including dealers, brokers, and aggregators. ASIC found that some target market determinations contained little or no practical detail about distributor training, accreditation, and monitoring. Several lenders consequently strengthened their distribution conditions, oversight frequency, quality assurance and high-volume distributor controls.

ASIC also examined training that encouraged dealership staff to overcome customer resistance to guaranteed-future-value loans, even where a customer’s stated preferences indicated that the product might not suit them. This is a reminder that scripts, sales targets, commission structures and staff training are part of the product-governance framework. A compliant TMD will not cure a sales process that pushes customers towards a preferred product.

Vehicle valuation can amplify consumer harm

ASIC observed that the purchase price financed was sometimes materially higher than the lender-verified book value of the vehicle. Average loan-to-valuation ratios across participating lenders ranged from 94% to 127%. A higher ratio is not automatically unlawful, and may reflect on-road costs or particular vehicle types. However, overvaluation, defects, older vehicles, high mileage and remote recovery costs can leave consumers with substantial debt if the vehicle is surrendered or repossessed and sold.

Lenders should therefore treat valuation as both a credit-risk and consumer-outcomes control. Reliance on information supplied by the selling dealer should be tested through independent valuation methods, exception thresholds and enhanced checks for higher-risk cohorts.

Early default data raised responsible-lending questions

Early or recurring defaults can indicate that a loan was unaffordable, unsuitable or poorly matched to the customer. Results varied significantly between lenders. ASIC reported that 64% of Rapid’s reviewed loans had one or more defaults, and 82% of those defaults occurred within the first six months. Rapid committed to reviewing its product structure, fees, lending processes, product-review triggers and potentially affected customers.

The broader lesson is that responsible lending cannot be demonstrated solely by a completed application form or automated pass result. Lenders and credit-assistance providers need evidence that reasonable inquiries were made, information was verified, material bank-statement data was considered, and the assessment addressed the consumer’s financial situation, requirements, and objectives.

Hardship, collections, and complaints were not always aligned

ASIC found examples where collections activity continued despite an active hardship arrangement or complaint. It also identified inconsistent access to hardship support and lower approval rates for regional and remote consumers. Several lenders improved resourcing, decision controls, customer communications and system-based collection pauses.

A compliant hardship framework is not simply a policy document. It requires accessible channels, timely decisions, trained staff, clear communications and systems that prevent collections and enforcement activity from cutting across hardship or complaint handling. Information about voluntary surrender, private sale and time-to-sell options should be given early enough to support an informed decision.

Repossession often did not extinguish the debt

Four lenders provided data on more than 250 repossessed loans. In nearly 90% of those cases, the consumer still owed more than half of the original loan amount after the vehicle was sold. In severe examples, the residual balance exceeded the amount originally borrowed.

Residual debt can reflect depreciation, overvaluation, capitalised fees, interest, enforcement costs and the timing or method of sale. ASIC’s concern is the combined outcome: consumers may lose an essential vehicle and remain liable for a large debt. Businesses should monitor residual debt by product, vehicle age, geography, dealer, broker and repossession channel, rather than treating each case as an isolated collections outcome.

Lenders were not making full use of their data

ASIC found gaps in measurable product-review triggers and in the use of hardship, arrears, complaint, and distributor data. Improvements made during the review included distributor dashboards, monthly thresholds, quality-assurance sampling, geographic analysis, enhanced audit frequency and escalation of unresolved compliance issues.

The practical benchmark is outcome-based monitoring. A board or compliance committee should be able to see where harm is occurring, identify whether it is concentrated in a product, location or distribution channel, and record the decision to restrict distribution. They should also be able to amend a TMD, remediate customers, or change the product as part of board-level legal risk oversight.

Linked-credit exposure was not operationalised

Where a lender regularly provides finance for vehicles sold through a dealer, it may be a linked credit provider under the National Credit Code (NCC). If the consumer suffers loss because of a supplier’s misrepresentation, breach of contract or failure of consideration, the dealer and linked credit provider may both be liable, subject to statutory limits and defences.

ASIC found that, at the start of the review, none of the participating lenders had a policy explaining how these obligations would be handled in practice. Lenders subsequently strengthened dealer reviews, accreditation, complaint monitoring, training, and retrospective remediation assessments.

Who is impacted?

The legal framework behind ASIC’s findings

National Credit Act obligations

A credit licensee’s general conduct obligations under Section 47 of the National Consumer Credit Protection Act 2009 (Cth) (NCCPA) include engaging in credit activities efficiently, honestly and fairly; maintaining adequate arrangements for conflicts, risk management, resources and representative compliance; and maintaining competence and training.

Responsible-lending obligations require the relevant lender or credit-assistance provider to make reasonable inquiries about the consumer’s financial situation, requirements and objectives, take reasonable steps to verify financial information, assess whether the contract is unsuitable, and refrain from entering or assisting with an unsuitable contract. Whether the NCC applies depends on the statutory purpose and other elements of the credit. The fact that the security is a motor vehicle does not, by itself, determine whether a transaction is consumer or business credit.

Design and distribution obligations

Car-loan issuers must define an appropriate target market, set objective distribution conditions, specify review triggers, take reasonable steps to support distribution consistent with the TMD, and review outcomes using issuer and distributor data. Where conditions are not adequate, the expected response may include amending the TMD, restricting or pausing distribution, redesigning the product, changing distributor arrangements or remediating affected customers.

Linked credit and dealer conduct

The NCC can make a linked credit provider liable with a dealer for loss arising from certain supplier misconduct. REP 832 also demonstrates that dealer conduct can create separate licensing and enforcement exposure. Businesses should not assume that a dealership exemption covers a dealer that is itself providing finance or operating a separate lending model.

Related court and enforcement matters

ASIC’s enforcement activity shows how the themes in REP 832 may translate into proceedings. These matters are separate from the review and should be understood according to their procedural status.

Money3 Loans: $1.55 million penalty

In April 2026, the Federal Court ordered Money3 Loans Pty Ltd to pay $1.55 million in penalties for responsible-lending breaches. The Court had found, in relation to five loans made between May 2019 and February 2021, that Money3 failed to make reasonable inquiries about or verify borrowers’ living expenses using bank-statement transaction data it held. In one instance, it also failed to make reasonable inquiries about the borrower’s requirements and objectives. The decision is a direct warning against collecting data without meaningfully using it in the assessment.

Diamond Wheels and Keo Automotive: unlicensed lending

In June 2026, the Federal Court found that Diamond Wheels Pty Ltd, trading as Lansvale Motor Group, and Keo Automotive Pty Ltd provided hundreds of car loans without a credit licence and charged unlawful and excessive interest. A director and former director was also found liable for involvement in the conduct. The companies and director admitted the contraventions. As at 17 August 2026, a hearing on penalty and other relief was scheduled for 20 August 2026.

Swoosh Finance: unresolved allegations

ASIC’s civil penalty proceeding against Ausfinancial Pty Ltd, trading as Swoosh Finance, remains on foot and is listed for trial in March 2027. ASIC alleges responsible-lending failures in relation to 11 consumers and DDO breaches arising from a failure to review TMDs and continued distribution despite increasing complaints. These are allegations that have not yet been determined by the Court.

Top tips for car finance businesses

1. Confirm the regulatory perimeter. Map who provides credit, who provides credit assistance and who relies on an exemption. Test consumer versus business-purpose classification, particularly for mixed-use vehicles, and do not rely on the label attached to the transaction.
2. Map the full distribution chain. Document every dealer, broker, aggregator, referrer and credit representative, the legal basis on which each acts, the products they distribute, their remuneration and the data they must provide.
3. Turn the TMD into an operating control. Use objective distribution conditions and measurable review triggers. Include early arrears, repeat default, hardship, complaints, cancellations, high fees, residual debt, geographic concentration and outcomes by distributor.
4. Review fees, incentives and sales practices. Test the total cost to the consumer, including capitalised distributor fees. Review sales scripts, staff scorecards, dealer targets, commission tiers, bonuses, and clawbacks for incentives that may override customer needs.
5. Strengthen vehicle valuation controls. Set independent valuation methods, LVR tolerances and exception approvals. Apply enhanced checks to older, high-mileage, repaired, imported or remotely located vehicles, and monitor dealer-level valuation exceptions.
6. Evidence responsible-lending judgment. Ensure bank-statement data and other verification are actually assessed. Record how anomalies, existing debt, wage-advance use, buy-now-pay-later commitments, dishonours and unusually low declared expenses were addressed.
7. Monitor outcomes by cohort and distributor. Create dashboards that identify harm early and permit comparison across product, dealer, broker, location, and customer cohort. High-volume distributors should receive proportionately stronger and more frequent review.
8. Connect hardship, complaints, and collections. Use system controls to pause inappropriate collections activity. Give accessible information about available options, monitor declined hardship applications and test outcomes for regional, remote and vulnerable consumers.
9. Operationalise linked-credit obligations. Maintain a policy for dealer-related claims, complaint escalation and statutory defences. Review dealer reputation, financial standing and complaint history, and preserve the records needed to demonstrate due inquiry.
10. Escalate, remediate and record decisions. Define thresholds for restricting distribution, reviewing a TMD, investigating a distributor, reporting a breach and remediating consumers. Boards and committees should receive decision-useful information and record the rationale for the response.

What should an immediate review cover?

A focused review should test a representative sample of recent loans and trace each loan from marketing and introduction through assessment, settlement, servicing, hardship, complaint, and enforcement, and, where appropriate, be supported by ACL compliance services for credit and finance businesses. At minimum, the review should compare written policies with system settings, recorded calls, bank-statement assessment, exception approvals, distributor files, fees, valuation evidence and actual customer outcomes.

The review should produce a prioritised remediation plan, not only a gap list. Immediate priorities are generally regulatory-perimeter issues, potentially unsuitable lending, unlicensed conduct, ineffective hardship or collections controls, systemic TMD failures, material distributor misconduct and cohorts that may require customer remediation.

For consumers experiencing difficulty

Consumers who are struggling with a car loan should contact the lender early and ask about hardship options. They may also obtain free assistance from a financial counsellor and may lodge a complaint with the lender’s internal dispute resolution function and, if the issue is not resolved, with the Australian Financial Complaints Authority (AFCA). ASIC’s Moneysmart website provides general consumer information.

How Click Legal can assist

We advise credit providers, brokers, aggregators, motor dealers and fintech businesses on ACL perimeter issues, responsible-lending frameworks, TMDs and distribution arrangements, outsourced compliance, hardship and IDR processes, monitoring and supervision, breach assessment and remediation.

To discuss a scoped review of your car-finance model, distribution arrangements or compliance framework, contact Click Legal for ACL compliance services for your compliance framework at [email protected]. We will confirm the proposed scope and fees before work begins.

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