|May 24, 2017||0|
When the National Consumer Credit Protection (NCCP) Act first came into effect in 1 July 2010 it was hailed as sweeping reform, the shining light for consumer protection.
Did you know? Car dealers were offered an ‘exemption’ !
The NCCP Act is the law governing consumer credit in Australia and its purpose is to protect consumers from any unethical practices within the finance industry.
Under the NCCP Act, as a credit assistance provider, I Love Loans must operate under an Australian Credit Licence (Licensee = Go Mortgage Corporation ACL 376838), ensure our brokers & staff are appropriately qualified and managed, and provide full disclosure of commissions, interest rates, fees and charges. We must also have dispute resolution processes in place.
In principle, we support regulation that helps protect consumers. However, not when the law establishes an uneven playing field.
When the Act was first established, businesses who introduced customers to credit at the point of sale, such as retailers (Like Harvey Norman, Domain, etc) and car dealers, were offered a ‘temporary exemption’ because of their point of sale (POS) status.
It is estimated that in Australia a total of around 12,300 retailers and 630 vehicle dealerships engage in credit activities as vendor introducers, so the magnitude of this exemption is huge.
Whilst the initial exemption on such providers was supposed to be temporary, it’s now been over 7 years and nothing has changed.
Many consumers may not even be aware that they lose their protection when they deal with point of sale financiers like Dealerships.
For example, under their NCCP-exempt status, vehicle dealerships don’t have to:
Even if the dealership financier is an ACL holder and is supposed to comply with the NCCP Act; the nature of POS finance means they are often discharging their obligations under the Act AFTER the decision to purchase the finance has already been made.
The other issue is how much influence the dealership has in steering consumers towards a particular credit product, which they benefit from. Dealers will generally offer a single finance product, from the financier who is also providing “floorplan” finance for their floor stock.
For the average consumer, a car is the second largest purchase they will make in their lifetime, and it can be a very exciting and emotionally charged one.
On the showroom floor it is easy to focus on just the repayment figure offered as part of dealer finance, when you are calculating what you can afford for the beautiful freedom machine in front of you. It’s quite likely you are not considering if the finance product is right for you, and what additional fees and charges may exist.
While most companies do the right thing, there are plenty of examples of cowboy car-yard finance, for example, the non-disclosure of fees, charges, commissions and even interest rates. These are some of the very behaviours that created the need for the NCCP Act in the first place.
You wouldn’t let your Real Estate Agent arrange your mortgage with no need to disclose the interest rate and other pertinent information. But under the current NCCP Act arrangements we allow this for cars?!
As a licensed broker, I Love Loans must comply with the National Consumer Credit Protection Act to the letter. We take into account the client’s objectives and requirements and ensure the loan will not cause undue hardship. We compare products from a range of lenders to arrive at the best solution for the customer and provide full disclosure on rates and fees.
What a shame the legislation designed to protect consumers does so only some of the time.