Consumer groups say the Australian Securities and Investments Commission (ASIC) has “watered down” proposed orders tackling add-on insurance sold through caryards, and have criticised delays in measures taking effect.

A revised draft product intervention order released for consultation adds a three-month transition period, while also retaining six-month delays on certain actions, and has removed some restrictions previously included under an “unconscionable conduct or manipulation” heading.

Consumer Action Law Centre CEO Gerard Brody says it’s been 10 months since the original draft intervention order was released for consultation and three years since a consultation paper outlining reforms.

“Now ASIC has proposed further commencement delays,” he says. “Even more concerning, ASIC has also proposed to water down specific protections in this latest version of the instrument.”

Consumer Action says its online tool, DemandaRefund.com, has helped generate 13,218 letters calling for $28 million in refunds from 2016 to June 30 this year, with more than $10.5 million of the total relating to car dealership sales.

The joint submission from Consumer Action, the Financial Rights Legal Centre and WEstjustice says ASIC needs to introduce the intervention order, which includes a deferred sales model, as soon as possible.

“The economic fallout from COVID-19 means people cannot afford this ongoing rip-off,” the submission says. “The incentives for dealers to prop up revenue by flogging junk products remain strong.”

The group says the draft instrument would significantly reduce the detriment caused by junk financial products but leaves loopholes that can be exploited by auto dealers, insurers and warranty providers.

Removal of the general prohibition on unconscionable conduct, included in the original draft, without replacing it with any restriction on pressure selling or unfair sales tactics is disappointing, the submission says.

“It is clear additional restrictions are needed to address these tactics,” it says. “Unconscionable conduct laws have consistently failed to protect consumers from significant harm or provide an accessible means of recourse.”

Consumer groups are also calling for the removal of exclusions for insurance sold for no consideration, or as the result of an extension to a motor vehicle loan or lease.

“Harm can come from a ‘free product’, particularly where it is used to convince a person to buy a car that turns out to be a lemon,” they say.

Amendments in the latest draft order are described as a “mixed bag” overall, while the changes would also make its operation more complex.

The consumer groups recommend ASIC issues additional straightforward plain English guidance for all stakeholders including insurers, car dealerships and sales representatives.

“The likelihood of compliance will be far greater if the meaning is accessible and understandable,” they say. “We doubt many car dealers will refer to the explanatory statement accompanying the order and relying on industry-led information campaigns is unrealistic.”