ANZ breaches credit rules

ANZ Bank (ASX:ANZ) has been caught breaching credit rules by Australia’s corporate watchdog, and has been forced to repay $5.3 million back to customers.

The Australian Securities and Investments Commission (ASIC) has today reported that more than 30,000 car owners will be paid back more than $15 million following a review into financing of tyre and rim insurance premiums.

Tyre and rim insurance provides cover to car owners for damage to tyres, including punctures and blowouts and also provides cover if a vehicle’s rim are damaged. This type of insurance is not commonly included in standard comprehensive insurance policies.

The National Credit Code allows the financing of premiums for one year only. Beyond that customers could be paying undue interest on premiums and being unfairly locked into longer contracts with one insurer.

ASIC says it found improper conduct by some of Australia’s largest car financiers, including ANZ, Bank of Queensland (ASX:BOQ), Macquarie Leasing – a subsidiary of Macquarie Group (ASX:MQG), RACV Finance, BMW Australia, Toyota, Nissan, Volkswagen, GE Automotive and a subsidiary of Westpac Banking Corporation (ASX:WBC), St George Finance.

ANZ had by far the largest number of affected customers with 9,829, and is to refund $5,308,000.

ASIC says the car financiers have put in place steps to refund the money, and were quick to respond once it was brought to their attention said ASIC deputy chairman Peter Kell. The review was prompted after BMW Australia notified ASIC it had breached the code – suggesting ASIC may not have picked up the issue had BMW not reported its own breach.

Foolish takeaway

It pays to read the fine print and read the terms and conditions of any contract you sign. But even then, it would’ve been hard for customers to pick up the issue – unless they had intimate knowledge of the National Credit Code.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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