ASIC has released Consultation Paper 324 Product intervention: The sale of add-on financial products through caryard intermediaries (CP 324) on a proposal to use its product intervention power to reform the sale of add-on financial products by car yards. Background.
ASIC proposes to introduce a deferred sales model to apply to sales of add-on insurance products and warranties by caryard intermediaries, other than comprehensive or compulsory third party (CTP) insurance, and manufacturers’ warranties provided with new cars. It would apply to all sales channels where intermediaries regularly arrange finance for motor vehicles, including car dealers, finance brokers and salary packaging firms.
Under the proposal, an intermediary cannot initiate contact with the consumer about the add-on products for four days after a consumer has agreed to buy a car.
A caryard intermediary is defined as an entity who distributes add-on products, where the sale of these products is associated with the acquisition of a car by the consumer.
In addition to the deferred sales model, ASIC proposes other requirements including:
- the use of ‘knock out’ questions to prohibit sales where the product has low or no value; and
- prohibiting the sale of warranties that provide low levels of cover (where the maximum amount that can be claimed is $2000 or less).
Additional reforms are proposed for mechanical risk products, including:
- prohibiting the sale of mechanical risk products on new cars should be restricted until close to the expiry of the manufacturer’s warranty;
- prohibiting the sale of mechanical risk products where the maximum amount payable is $2000 or less;
- requiring providers to offer refunds on cancellation or termination of the product; and
- removing contractual requirements on consumers to service the vehicle that are onerous.