Borrow
400k Aussies caught up in shonky car loan schemes
Two banks are in hot water after they allegedly colluded with car dealers to hit consumers with “unfair” high-interest loans on their purchase of a vehicle.
400k Aussies caught up in shonky car loan schemes
Two banks are in hot water after they allegedly colluded with car dealers to hit consumers with “unfair” high-interest loans on their purchase of a vehicle.
According to a statement from Maurice Blackburn, “borrowers were not told that Westpac and St.George had a cosy deal with car dealers that allowed the car dealers to hike up the interest rates on car loans from a ‘base rate’ in order to earn substantial ‘flex commissions’.”
The law firm said it has commenced a class action in the Victorian Supreme Court about the matter, which saw consumers charged more than three times the base interest rate set by Westpac and St.George in some cases.
In many cases, higher interest rates weren’t determined by objective criteria such as credit risk.
Instead, the law firm said higher rates “were crudely used to boost the profits of care dealers and Westpac and St.George”.
It’s reported that flex arrangements were a feature of the industry for more than 25 years before ASIC finally outlawed the practice in 2018.
Not long after, the final report of the financial services royal commission also condemned the practice, highlighting “the dealer’s interest in securing the highest rate possible is obvious”.
It read: “To the borrower, the dealer might have appeared to be acting for the borrower by submitting a loan proposal on behalf of the borrower. The borrower was given no indication that in fact the dealer was looking after its own interests.”
According to Maurice Blackburn’s national head of class actions, Andrew Watson, hundreds of thousands of Australian car purchasers have been affected by the practice.
The lawyer explained how “the expectations of consumers were that the dealer was a conduit for, but was not setting, the interest rate. It is safe to assume that most consumers understood that the roles of car dealers and lenders were distinct.”
But he said the Westpac and St.George arrangement actually rewarded car dealers for going above and beyond — and gouging higher interest rates out of consumers.
“This case will seek to prove that Westpac and St.George failed to comply with their obligations under consumer credit protection laws and that this failure caused substantial losses for many consumers,” he noted.
In some cases, consumers were slugged with interest rates that were more than 10 per cent above the underlying base rate offered by the bank, Mr Watson flagged, with a number of consumers not even told of the loan’s interest rate until after they agreed to purchase the car.
Maurice Blackburn has revealed that there appears to be approximately 400,000 Australians who have been impacted by such schemes. However, the current class action will be restricted to anyone with a Westpac or St.George car loan from 1 March 2013 to 31 October 2018.
About the author
About the author
Loans
Why it pays to have a principal and interest loan
Owner-occupiers who are paying principal and interest on their mortgage are being rewarded by financial institutions with a lower interest rate. ...Read more
Loans
1 in 10 mortgages temporarily deferred
The financial impact of COVID-19 has been revealed, as one in 10 mortgage-holders has deferred payments during the pandemic. ...Read more
Loans
Is it time to get a better rate?
Mortgage-holders are being advised to take advantage of record-low interest rates and refinance if they haven’t already done so. ...Read more
Loans
Big 4 bank cracks down on mortgage applications
A major bank has announced that it will reduce the borrowing capacity for its customers as it tightens serviceability criteria for new mortgages. ...Read more
Loans
Banking system faces significantly raised credit risk
The banking sector’s commitment to extend loan repayment holidays for distressed mortgage-holders could deteriorate the system’s credit quality and require higher loan loss provisions. ...Read more
Loans
Should you freeze your mortgage?
While pausing mortgage repayments may be tempting for those struggling with payments, it may be best to explore other options first to avoid some negative long-term effects. ...Read more
Loans
Why mortgage-holders ‘are their own worst enemy’
Australians are paying more for their home loan due to complacency, at a time when mortgage-holders need the savings the most, new research has shown. ...Read more
Loans
Where can you get a mortgage rate under 2 per cent?
New mortgage-holders can now get rates for below 2 per cent, as authorised deposit-taking institutions fight for new business. ...Read more
Loans
Why it pays to have a principal and interest loan
Owner-occupiers who are paying principal and interest on their mortgage are being rewarded by financial institutions with a lower interest rate. ...Read more
Loans
1 in 10 mortgages temporarily deferred
The financial impact of COVID-19 has been revealed, as one in 10 mortgage-holders has deferred payments during the pandemic. ...Read more
Loans
Is it time to get a better rate?
Mortgage-holders are being advised to take advantage of record-low interest rates and refinance if they haven’t already done so. ...Read more
Loans
Big 4 bank cracks down on mortgage applications
A major bank has announced that it will reduce the borrowing capacity for its customers as it tightens serviceability criteria for new mortgages. ...Read more
Loans
Banking system faces significantly raised credit risk
The banking sector’s commitment to extend loan repayment holidays for distressed mortgage-holders could deteriorate the system’s credit quality and require higher loan loss provisions. ...Read more
Loans
Should you freeze your mortgage?
While pausing mortgage repayments may be tempting for those struggling with payments, it may be best to explore other options first to avoid some negative long-term effects. ...Read more
Loans
Why mortgage-holders ‘are their own worst enemy’
Australians are paying more for their home loan due to complacency, at a time when mortgage-holders need the savings the most, new research has shown. ...Read more
Loans
Where can you get a mortgage rate under 2 per cent?
New mortgage-holders can now get rates for below 2 per cent, as authorised deposit-taking institutions fight for new business. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
