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Class action law firm Shine Lawyers (ASX: SHJ) has launched a class action against Westpac (ASX: WBC) and its subsidiaries, alleging the bank and car dealerships ripped-off customers with dodgy loans.
The class action alleges so-called 'flex commission loans' unfairly rorted customers through a scheme that has since been banned by the corporate regulator.
Shine class actions practice leader Vicky Antzoulatos said the firm will allege car buyers signed-up to the loans as a result of lenders engaging in conduct that was unfair or dishonest.
"If you bought a car from a dealership using 'in-store' finance for personal use from July 2014 to November 2018, you may have been the victim of a flex car loan rort," Antzoulatos said.
"Under the now-banned scheme, dealerships spruiked cars with finance while failing to disclose the interest rate on the loans was arranged with the lender in exchange for commissions.
"The commissions paid were the difference between the base interest rate and the rate car buyers agreed to, and in many cases this led to buyers paying exorbitant and unfair loans."
Shine says Westpac and its subsidiaries including St George, Bank of Melbourne and Capital Finance Australia breached their obligations to customers under consumer credit legislation to provide services to car lenders fairly and honestly.
"The bank and its subsidiaries failed to disclose to consumers the true nature of their commission structure with the car dealers and we will allege this was illegal," Antzoulatos said.
"Buyers signed up to these rip-off loans while deals were made behind closed doors that were not disclosed, so car dealers and the lenders could piggyback hefty margins above the usual rates.
"The extent of the damage to car buyers was identified in the Financial Services Royal Commission, which revealed the loans were costing consumers thousands of dollars."
Shine says in some cases customers were charged between 6.5 per cent and 15.5 per cent interest over and above the base rate. The difference in the commission on the sale of these loans was $315 and $10,823 respectively.
The class action will be filed in the Federal Court in the coming weeks and is open to buyers who took out a loan for personal use through their car dealer with Westpac or its subsidiaries between July 2014 and November 2018.
The news comes as Westpac has appointed a new CFO today, with Michael Rowland to step into the role.
Rowland joins Westpac from KPMG where he is a partner in management consulting, specialising in financial services.
Gary Thursby, the current acting CFO, will continue acting in the role until Rowland joins Westpac later in 2020.
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