Prestige carmaker BMW will pay back $72 million to ordinary Australian car buyers who were misled into believing they could afford one of the luxury German vehicles.

The massive consumer pay-back – perhaps Australia's largest ever – will also see the Munich-based company's finance arm paying $5 million into a "community benefit fund" to help educate people about financial literacy.

Fairfax Media can reveal that BMW Australia Finance has signed an enforceable undertaking with the corporate regulator to repay the money after we revealed in August that the company was giving big loans to people with zero or even negative disposable incomes.

A scathing review found that, while the company's most reckless salesmen were rewarded with bonuses, BMW had given a loan of $27,000 to a single mother of 10 children even though she was in casual employment and had negative disposable income.

It gave $23,300 to a refugee aged 21 who had been employed for just one month and whose income was overstated. And it granted a loan of nearly $50,000 to a 76-year-old man based on earning projections rather than the man's real income. The loan was almost twice the value of the car.

The company accepted false loan documents to justify their decisions.

The "remediation" program, agreed with the Australian Securities and Investments Commission, is open to all customers of BMW Finance, Alphera Financial Services and Mini Financial Services brands – all fully-owned subsidiaries of BMW.

The company will write off $50 million in loans that the company should never have made, will make $14.6 million in direct payments to people who were ripped off or misled and grant $7.5 million in interest rate reductions on current loan contracts.

The program is understood to identify at least 15,000 customers who suffered hardship when borrowing to buy the European marque between January 2011 and August 2016.

The agreement came as BMW Australia Finance faced the real threat of a class action from disgruntled borrowers, who were often left owing more than their car was worth. Sources said such a class action would have had a good chance of success because there was evidence that the company's management was aware of the failures and lack of controls in its business.

ASIC believes that BMW Finance had a "sales-driven culture" that failed to comply with the requirements of the credit laws.

"This is an example of the staggering cost of poor business practices and should act as a warning to other car financiers to get their houses in order."

Details of the company's poor lending practices came to light in August when an ASIC-appointed accounting firm, Ernst & Young, conducted a forensic audit of the company's books. Out of 100 BMW customer files that it considered questionable, the accountants found 98 per cent breached the consumer credit code. In the vast bulk of these files, the finance company had underestimated people's monthly spending when assessing them for a loan.

Ernst & Young's appointment has been extended until the end of next year, and it will conduct a "live review" of a sample of new loans that BMW is writing.

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