Flex commissions in car finance market banned

The Australian Securities and Investments Commission (ASIC) has formally banned flex commissions in the car finance market, with the legislative instrument to ban these commissions registered on the Federal Register of Legislative Instruments.

Flex commissions are paid by lenders to car finance brokers (typically car dealers), allowing the dealers to set the interest rate on the car loan. The higher the interest rate, the larger the commission earnt by the dealer.

ASIC is banning these commissions because it has found that they lead to consumers paying excessive interest rates on their car loans. The ban comes after ASIC led a public consultation on banning these commissions.

"We found that flex commissions resulted in consumers paying very high interest rates on their car loans. We were particularly concerned about the impact on less financially experienced consumers," ASIC Deputy Chair Peter Kell said.

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