$1.39 million in refunds for BMW customers

BMW Finance will issue refunds totalling $1,392,667 to 2466 customers who have taken out three-year tyre and wheel rim insurance policies for their cars.

The company noticed that bundling payments for the three-year policy into the finance package used to pay for a car caused a breach of the National Credit Code, and voluntarily notified the Australian Securities and Investments Commission (ASIC).

Australia’s National Credit Code, and its predecessor the Uniform Consumer Credit Code, forbids the financing of insurance premiums lasting for more than 12 months.

The practice is deemed to have a number of drawbacks for consumers, including paying interest on premiums not yet due and being tied to one insurer for a long period.

BMW Group Australia’s head of communications, Piers Scott, told GoAuto BMW is refunding customers the full cost of the policy, but not withdrawing the cover.

“It was of our own volition that we identified our concerns that we may be in breach back in October last year, we brought this to (ASIC) and sought an exemption while immediately freezing the issue of any new policies.

“It is just now that ASIC has come back and confirmed we are in breach and will have to refund customers.”

Mr Scott said he believes other car companies are taking similar action and ASIC has announced it is now “undertaking an industry-wide review of the financing of tyre and rim insurance premiums to ensure compliance”.

Customers requiring the insurance will now have to either pay for the insurance in full up front with cash or, if financing is required, enter into a rolling 12-month contract.

Mr Scott said the financial implications for BMW Finance were “not enormous” but by refunding the full cost of the policies meant it was paying out more than it earned as a result of selling them.

“For customers, there is certainly nobody out of pocket,” he said.