Westpac and its subsidiaries face two class actions, after two law firms announced last week that they were filing claims over car finance arrangements.
Maurice Blackburn commenced proceedings in the Victorian Supreme Court alleging that Westpac and St George Finance “colluded with car dealers to sting consumers with unfair high interest loans”.
Earlier in the week, Shine Lawyers said it would launch a class action in the Federal Court alleging that Westpac and its subsidiaries, as well as another finance company, breached their obligations under consumer credit law by failing to disclose to consumers the true nature of their commission structures when working with car dealers.
The Shine claim covers Westpac, St George Bank, Bank of Melbourne and Capital Finance Australia.
Westpac was criticised in the Hayne royal commission report for continuing to offer so-called “flex commission” arrangements to car dealers until they were outlawed in November 2018, even though it accepted earlier that the practice could be unfair.
Flex commissions gave dealers a cut of the interest payable if they could persuade the borrower to pay a higher rate than the lender’s base rate. In the Royal Commission’s view that was an arrangement that simply added cost for the borrower, who knew nothing about the arrangement.
Shine Lawyers class action practice leader Vicky Antzoulatos said: “If you bought a car from a dealership using ‘in-store’ finance from July 2014 to November 2018, you may have been the victim of a flex car loan rort.
“Under the now-banned scheme, dealerships spruiked cars with finance, while failing to disclose that the interest rate on the loans was arranged with the lender in exchange for commissions.”
“In some cases, customers who bought the same car or a vehicle of similar value on the same day were charged between 6.5 per cent and 15.5 per cent interest over and above the base rate.”
Maurice Blackburn said that in some cases consumers were charged more than three times the base interest rate set by Westpac and St George.
Maurice Blackburn national head of class actions, Andrew Watson, said: “Westpac and St George had set up an arrangement that rewarded the car dealers for gouging their customers.
“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.”
Watson estimates the size of the class at around 400,000.
Shine’s class action is open to car buyers who took out a loan for personal use through their car dealer between July 2014 and November 2018, and Maurice Blackburn’s between 2013 and 2018.