Westpac hit with second class action over flex commission car loans
17 July 2020, Written by David Simmons
Westpac (ASX: WBC) is facing a second class action about the use of 'flex commission loans' with car dealers.
Law firm Maurice Blackburn alleges Westpac and subsidiary St George Finance colluded with car dealers to "sting" consumers with high interest loans.
It mirrors a class action launched by Shine Lawyers (ASX: SHJ) earlier this week, alleging so-called 'flex commission loans' unfairly rorted customers through the scheme that has since been banned by the corporate regulator.
Like Shine, Maurice Blackburn's class action filed in the Victorian Supreme Court on Wednesday will allege Westpac cosied up to car dealers to hike up interest rates on car loans from a base rate in order to earn substantial 'flex commissions'.
Maurice Blackburn says in some cases, consumers were charged more than three times the base interest rate set by Westpac and St George.
The flex arrangements were a feature of the car industry for over 25 years before the practice was outlawed by ASIC in 2018 and condemned by the final report of the Financial Services Royal Commission.
Maurice Blackburn's National Head of Class Actions, Andrew Watson, says 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," says Watson.
"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 says some consumers were hit with interest rates that were more than 10 per cent above the underlying base rate offered by the bank, and in many cases, were not told of the loan's interest rate until after they agreed to purchase the car.
Maurice Blackburn estimates there are approximately 400,000 potential class action members.
Those with Westpac and St George car loans from 1 March 2013 to 31 October 2018 can register for the class action.
Westpac says it will be defending the class action.
Business News Australia
Author: David Simmons