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ASIC commences civil penalty proceedings against Volkswagen Australia

Christian Fernsby |
ASIC has commenced proceedings in the Federal Court of Australia against Volkswagen Financial Services Australia Pty Limited (Volkswagen).

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Volkswagen operates nationally to provide borrowers with consumer loans to purchase new and used cars.

ASIC alleges between 20 December 2013 and 15 December 2016, Volkswagen contravened the responsible lending provisions of the National Consumer Credit Protection Act 2009 (Cth) (National Credit Act) in relation to 49,380 loan contracts by:

not making reasonable inquiries about borrowers’ living expenses in contravention of ss 128(d) and 130(1)(b) of the National Credit Act in relation to a subset of the loans;

not taking reasonable steps to verify borrowers’ living expenses in contravention of ss 128(d) and 130(1)(c) of the National Credit Act in relation to each of the loans; and

not making an assessment in accordance with s 129 of the National Credit Act in relation to whether each of the loan contracts was unsuitable for the relevant consumer, in contravention of s128(c) of the National Credit Act.

ASIC is asking the Court to find that Volkswagen contravened the National Credit Act provisions in respect of each of the loans and to impose a civil penalty on it for doing so. The maximum penalty for one contravention of the relevant provisions during the period of the contraventions was 10,000 penalty units which equates to $1.7 million in the period to 31 July 2015 and $1.8 million thereafter.

The National Credit Act provides consumer protections to ensure that credit providers make reasonable inquiries about a borrower’s financial situation before assessing whether a loan contract will be unsuitable for the borrower.

‘The responsible lending obligations in the National Credit Act are intended to prevent consumers entering unsuitable credit contracts. While ASIC will continue to enforce the law and target poor practices, it is entirely the responsibility of credit providers to properly assess whether the consumer has the capacity to service the loan without incurring substantial hardship,’ said ASIC Commissioner Sean Hughes.

ASIC also alleges that Volkswagen contravened its obligations under s47 of the National Credit Act requiring it to engage in credit activities efficiently, honestly and fairly and to comply the National Credit Act. There is no penalty for a contravention of that provision.

The proceeding will be listed for a first case management hearing on a date to be determined by the Court.

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