Consumer law court cases rocket and car buyers who default on their loans are a big reason

Consumer law cases brought before the courts have rocketed in the past year thanks to an increase in the small claims cap and car loan defaults are a significant cause.

An increase in the number of Australians who are defaulting on their car loans is contributing to a rise in consumer law cases being lodged in court.

There was a 64 per cent increase in consumer law filings in 2023–24, amounting to 406 filings compared with 248 filings in the previous financial year, according to the Federal Circuit and Family Court’s latest annual report.

“Significantly, this is also a 132 per cent increase from the 2021–22 financial year, indicating an ongoing increase in filings in this area of the court’s jurisdiction,” the report said.

As the cost of living pressures hurt and regulators crack down on anti-consumer behaviour, the report stated “the most significant increase” in the consumer law jurisdiction was related to small claims and breaches of the National Consumer Credit Protection Act 2009.

Changes introduced on July 1 last year increased the small claims cap from $20,000 to $100,000, meaning bigger claims could benefit from quick and simple resolution in the Federal Circuit and Family Court.

The greatest number of consumer law applications were filed and finalised in South Australia, followed by Queensland and New South Wales.

A spokesman for the Federal Circuit and Family Court told The Australian the small claims amendment was likely apply to the increase in consumer law cases, many of which were related to small motor vehicle finance claims.

As well, he said the reputation of the court in facilitating matters quickly and without significant expense was something that attracted more users to the jurisdiction.

Two judgments were recently awarded in favour of car manufacturer, seller and financier Volkswagen which permitted the company to repossess vehicles after their buyers defaulted on loan payments.

Volkswagen finance has secured two judgments in its favour. Picture: AFP

In one case, the court said Volkswagen could take back a 2016 Ford Ranger and keys bought in 2021 after the man who purchased it defaulted on a monthly instalment of about $1110 in September last year. In total, the man had agreed to pay a little over $66,000 for the car.

In another matter, the court allowed Volkswagen Financial Services to repossess a Holden and its keys after a man defaulted on a monthly instalment in November 2022. In total, the man had agreed to pay about $43,000 across 59 payments.

The court ordered a Victorian woman to hand over a Honda Odyssey wagon and keys to credit provider Secure Funding, after she defaulted on one instalment out of total of $50,000 she agreed to pay for the car.

Before Secure Funding issued the woman with a default notice in June last year, she stopped making payments on the loan and the company opted to sue her for the money.

The woman, who was self-represented and appeared with her husband at a hearing this year, “levelled a series of criticisms to Secure Funding and to the firm acting on its behalf”, the judgment read.

“(This included) that they were using language that was not intelligible, that they had engaged in perjury, had conducted a stalking operation and that the evidence they relied upon to establish that there was a loan agreement was hearsay and inadmissable,” the judgment said.

Consumer law applications account for 13 per cent of the general federal law matters lodged with the Federal Circuit and Family Court.

The court’s general federal law jurisdiction includes administrative law, admiralty law, bankruptcy, human rights, fair work (industrial law) and intellectual property.

Bankruptcy matters contribute the highest volume to the court’s general federal law jurisdiction, accounting for 45 per cent of filings in the past financial year.

This is followed by fair work applications, which account for 37 per cent of general federal law filings. Consumer law filings are the third largest application type, at 13 per cent.

In 2023–24, the court finalised 78 per cent of general federal law matters within 12 months, according to the latest annual report.