Published: 07 December 2016 Wednesday, 08:42 AM
Bonn, Dec 06 (deutschenews24.de/dpa) -- BMW will have to pay back 72 million Australian dollars (53.8 million US dollars) to car buyers in Australia who were misled into believing they could afford the luxury German vehicles, the country`s corporate watchdog announced Tuesday.
In the biggest consumer remediation program in Australia`s history, the finance arm of the Munich-based luxury car maker will also have to pay 5 million dollars into a community fund to educate people about finance and borrowing, the Australian Securities and Investment Commission (ASIC) said.
ASIC said the remediation would identify at least 15,000 customers who between January 2011 and August 2016 may have suffered hardship as a result of BMW Finance`s failure to comply with consumer protection law.
"BMW Finance had a sales-driven culture that failed to comply with the requirements of the credit laws and resulted in poor outcomes for many consumers," ASIC deputy chairman Peter Kell said.
"This is an example of the staggering cost of poor business practices and should act as a warning to other car financiers to get their houses in order," Mr Kell said.
ASIC found the company`s salesmen were rewarded with bonuses while giving loans to buy BMW vehicles to people who couldn`t possibly afford to repay them.
An ASIC review of BMW Australia Finance done in August by consultants Ernst & Young found several examples of dodgy loans: A mother of ten was given a loan of 27,000 dollars even though she had negative disposable income; a 21-year-old refugee who had had a job for just one month was given 23,000 dollars; and a 76-year-old man was given 50,000 dollars - twice the value of the car.
BMW`s agreement with ASIC includes 14.6 million dollars in remediation payments, 7.6 million dollars in interest rate reductions on current contracts, and 50 million dollars in loan write-offs.
BMW Finance will also remove default listings and buy back all debt sold to third parties to ensure that the written-off loans are not subject to further collections activities.
The remediation program will be overseen by an independent consultant who will report to ASIC.
BMW Australia Finance has already paid hundreds of thousands of dollars in penalties to ASIC for breaches of consumer protection law in its lending practices.
The Sydney Morning Herald reported BMW Australia Finance had agreed to the massive payback as it faced the threat of a class action from an estimated 15,000 disgruntled borrowers.