Car loans class action

Westpac Banking Corporation has been hit with a class action over a commission scheme that allegedly allowed car dealers to charge customers exorbitant interest rates on purchases.

Under the arrangement know as flex commissions, Westpac allegedly colluded with car dealers so they could make extra profit by hiking interest rates to as much as three times the base rate.

Lawyers Maurice Blackburn filed the class action in the Victorian Supreme Court yesterday against Westpac and St George Finance Limited on behalf of up to 400,000 potential group members.

The action covers the period March 1, 2013 to October 31, 2018. Maurice Blackburn is also investigating the actions of Esanda, ANZ and Macquarie Bank over the same dates.

Separately, Shine Lawyers are also planning to bring a class action against Westpac over flex commissions in the federal court.

Flex commissions were slammed by the banking royal commission and banned by corporate watchdog ASIC in 2018.

Maurice Blackburn’s national head of class actions, Andrew Watson, said that hundreds of thousands of consumers were affected by the practice, unaware that the interest rate on their car loans was inflated by the dealership in return for undisclosed kick-backs.

“The expectations of consumers was 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,” Watson said

“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.”

The case of one of the lead applicants has already been highlighted. Alannah Fox was charged a 12.99 per cent interest rate on a $47,323 purchase, meaning she paid $24,864 in interest for her 2015 Hyundai ix35.

“They didn’t tell me the interest rate until I went to pick up the car. We bargained hard on the initial price, but I believe they knew what they were doing and slugged me with the high interest rate to compensate,” Fox said.

“Banks and car dealerships ripped-off so many unsuspecting car buyers. I feel they targeted me because I was young and eager to get in to my first new car. My advice to other car buyers is shop around and make them explain to you exactly how the loan works and where the money is going.”

Westpac has confirmed it will defend the class action.