New class action over use of ‘flex commission’ loans

Westpac and its subsidiary St George Finance have been hit with a second class action suit over its past use of now-banned “flex commission” consumer car loans.

Maurice Blackburn alleges 400,000 people have been overcharged by Westpac and St George.

Westpac and its subsidiary St George Finance have been hit with a second class action suit over its past use of now-banned “flex commission” consumer car loans, which allowed dealers to set the interest rates on loans without informing the customer.

The suit, filed in the Victorian Supreme Court, comes three days after Shine Lawyers announced its intention to file a class-action suit against Westpac in the Federal Court for the same reason.

Flex commission loans, which were banned in late 2018, allowed car dealers to increase commissions on loans above the “base rate” offered by the bank and receive a cut of the difference as commission.

In a statement of claim submitted to the Victorian Supreme Court, Maurice Blackburn alleges that Westpac’s flexible commission scheme could constitute “unfair or dishonest” conduct outlawed by the National Consumer Credit Act as the rates of the loan were “set in the absence of any objective criteria” in circumstances “where the amount of the Contract Rate would be influenced or determined by the self-interest of the dealers”.

It is also alleged that Westpac “did not ensure that the dealers disclosed” the construction of the loan, creating a situation where consumers were at a “special disadvantage” because they did not understand that they were being induced to accept a loan with “less favourable” terms through a mechanism that “manipulated” them and “in good conscience should not be used”.

Maurice Blackburn’s national head of class actions Andrew Watson said hundreds of thousands of consumers were unaware that the interest rate on their car loans was inflated by the dealers.

“The expectations of consumers was that the dealer was a conduit for, but was not setting, the interest rate,” Mr Watson said.

“It is safe to assume that most consumers understood that the roles of car dealers and lenders were distinct.”

Maurice Blackburn alleges 400,000 people have been overcharged by Westpac and St George.