Banking royal commission: car buyer given bank loan for a ‘lemon’

A part-time carer has told of a dodgy late-night deal at a car yard, as the bank inquiry turns its sights on auto finance.

The financial services royal commission is throwing the spotlight on misconduct in the $35.7 billion a year auto finance business.

A part-time carer was kept at a car dealer until late in the night before being given a Bank of Melbourne car loan to buy a vehicle that turned out to be a lemon, the financial services royal commission has heard.

Nalini Thiruvangadam told the commission that in mid-2012 she wanted to buy a reliable new car for her job after her old Mitsubishi Magna caught fire while she was driving it.

However, the only bank or dealer who would give her finance instead sold her an unreliable demonstrator Ford Focus with a lot of kilometres on the clock and a habit of stalling.

She fell behind on the payments of $259.19 a fortnight almost immediately, the commission heard.

Ms Thiruvangadam was giving evidence today as part of hearings in which the commission has thrown its spotlight on misconduct in the $35.7 billion a year auto finance business, including both lending practices such as sky-high commissions for dealers and the sale of often useless add-on insurance.

Bank of Melbourne’s parent, big four bank Westpac, now admits the loan should never have been made.

“We never should have made this loan, that’s correct,” Westpac’s general manager of specialist finance, Phillip Godkin told the commission.

He admitted the bank did nothing to verify the information given to it by the car dealer but said the bank had strengthened its policies since then — including as recently as last August.

However, he said he was not qualified to comment on whether the bank was breaking credit laws by relying on material from car yard dealers.

“In the vast majority of cases, we do not” verify expenses, he said.

Ms Thiruvangadam said she tried to get loans from banks including Westpac, which knocked her back because: “I had a Citibank credit card that was not paid”.

At the time, she was earning about $350 a fortnight as a personal care assistant and receiving Centrelink benefits, she told the commission.

Eventually, Ms Thiruvangadam found a dealer some 50kms away from her home who was willing to financier her.

“He said, don’t worry, come to my car dealer and you are definitely going back with a car tonight,” she said.

After picking up her children from school, she and a friend drove to the dealership.

“While I was in his office he was on the phone on and off talking to someone,” Ms Thiruvangadam said.

“He asked me to go out of the office and sit with my friend and kids.”

Later, the manager came back to his office “and was talking for close to one and a half hours” on the phone.

He asked if she had any properties, but she told him she was renting. Nonetheless, she signed finance paperwork that she told the commission she did not get a chance to read.

She also didn’t take the car with her because “it was already dark, it was very late”.

Later, when she went through the documents she was shocked to discover the car was a demonstrator.

“I didn’t want that,” she said.

However, the dealer would not take the car back.

“No, it’s already your car,” she said she was told.

She was also shocked by the repayments required because she knew she could not afford to make them, she said.

“Nothing was explained to me,” she said.

“Most of the time he was on the phone and only in the last period he asked me to sign it.”

An emotional Ms Thiruvangadam said after she lost her job due to injuring her legs she was forced to sell jewellery given to her by her mother and fell behind on her rent as she struggled to repay the car loan.

Eventually, after she got help from the Consumer Action Law Centre last year, Westpac forgave the loan and agreed to pay her $20,000.

She kept the car.