AFC Executive Director Ron Hardaker recommends AADA involvement in ASIC inquiry, but progress is slow.
Earlier in the year Automotive Dealer reported that the Australian Securities and Investments Commission (ASIC) was conducting an inquiry into how interest rates are set for consumers in Australian dealerships at point of sale. The inquiry, which would examine the mechanics of finance arrangements set in place across dealerships, could result in changes to the structure of dealership wholesale and retail finance arrangements. This in turn could seriously erode dealership profitability, which already relies on alternative revenue to supplement narrowing profit margins on new car sales due to intense competition in the Australian market.
The Australian Finance Conference (AFC), which has been participating in the ASIC inquiry on behalf of its members who were requested by ASIC to provide details of their dealer remuneration arrangements. Dealer clients voiced concerns to the AFC about the impact that changes could have on their operations, particularly if new policies were formed without reasonable consultation with the AADA. At the time, ASIC was not keen to engage with the AADA.
Around the same time the story was published, the AADA asked AFC Executive Director, Ron Hardaker, to speak at the Convention in July. Back then, Hardaker was certain there would be developments to report; however he arrived at the Convention with little details to share.
‘These things take time and we’re probably two more iterations and a couple more months [away]’ he said.
At the Convention, Hardaker also pointed out that ‘the focus of the work has not been Dealer finance profitability’ – rather it has centred on flex rate plans and the issues of consumer detriment and conflict of interest in various scenarios, issues integral to the financiers Australian Credit Licences.
In what was good news, Hardaker mentioned that though ‘there hasn’t been a table yet for AADA to sit around with ASIC’, there will come a time when AADA’s involvement in the inquiry will be sought. The AFC has recommended to ASIC that AADA be consulted as part of the process and this will hopefully take place in coming months.
AADA acknowledges and disagrees with the comment by ASIC Deputy Chairman, Peter Kell in his speech to the Mortgage and Finance Association of Australia National Convention, 14 May 2014 that ASIC has ‘spoken to industry stakeholders about our preliminary views.’ AADA has formally written to ASIC about its lack of consultation on this issue and is seeking a copy of any preliminary report.
In his closing remarks, Hardaker was hopeful for more progress over the next twelve months as ASIC works towards achieving its enquiry outcomes:
‘If I’m invited back here next year, we may actually be able to report some progress, but we’ll wait and see.’
AADA has written to Deputy Chairmen Peter Kell requesting a meeting on this issue.