The Australian Securities and Investments Commission (ASIC) is undertaking an industry-wide review of the financing of tyre and rim insurance premiums after a car financier breached the law.

BMW Australia Finance will refund 2466 customers a total of $1.39 million after breaching the National Credit Code.

The financier notified the Australian Securities and Investments Commission (ASIC) last year that it had been extending credit to car buyers for tyre and rim insurance premiums for three-year periods.

The National Credit Code prohibits lenders financing premiums if the insurance lasts longer than 12 months.

ASIC says buying and financing insurance for more than one year in advance has drawbacks for consumers, including paying interest on premiums not yet due, and signing up with one insurer for a long period.

ASIC Commissioner Peter Kell says when this law is breached consumers are entitled to be refunded the whole of the premium they have paid. “ASIC will work to ensure that this happens,” he said.

BMW Finance will refund the financed premiums for customers and allow them to retain the benefits of their policies.