Aussie’s $24K ‘rip off’ car loan battle
When Alannah Fox bought her first new car, she trusted she was getting a fair deal on her loan.
Instead, the teachers' aide, who was 25 at the time, was charged 12.99 per cent on a loan of just over $47,000 - which meant she had to pay a staggering $24,864 in interest for her 2015 Hyundai ix35.
She claims she was only told of the interest rate after the deal was struck.
"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," Ms Fox said.
Ms Fox is now one of the lead applicants in a new class action over shonky bank car loans, which leading law firm Maurice Blackburn commenced earlier this week in the Victorian Supreme Court.
It alleges that Westpac Banking Corporation and St George Finance Limited colluded with car dealers to sting consumers with unfair high interest loans in Australia's multi-billion dollar car finance industry.
The claim alleges that borrowers were not told that Westpac and St George had a deal with car dealers that allowed them to hike up the interest rates on car loans from a "base rate" in order to earn substantial "flex commissions".
"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," Ms Fox said.
"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."
Maurice Blackburn estimates hundreds of thousands of motorists could benefit from the class action, and that in some cases, Aussies were charged more than triple the base interest rate set by the banks.
Flex arrangements were a normal feature of the car industry for over 25 years, but it was banned by the Australian Securities and Investments Commission in 2018 and was slammed in the final report of the banking royal commission.
Maurice Blackburn's national head of class actions, Andrew Watson, said countless consumers were likely affected by the practice and that most would not have realised they were paying more than they needed to.
"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," Mr 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."
Based on ASIC statistics, it is understood there are around 400,000 class members.
Those with Westpac and St George car loans from March 1, 2013 to October 31, 2018 can register for the class action here.
Originally published as Aussie's $24K 'rip off' car loan battle