Toyota owners ‘ripped off’ by flex commissions form class action

A controversial loan practice since outlawed in Australia is the subject of a class action directed at the nation’s largest automotive brand.

Toyota Finance customers “ripped off” by controversial flex commissions can join a new class action lawsuit in Australia.

The action pursued by Echo Law seeks compensation for customers who paid excessive interest for car loans between 2010 and 2018.

Car dealers for many manufacturers, including Toyota, were paid bonuses for charging higher interest rates in an arrangement outlawed by the Australian Securities and Investments Commission in 2018.

Toyota is accused of taking advantage of customers with poor financial literacy.

At the time, financial lenders secretly approved customers for a range of interest rates, and paid higher sales commissions to dealership staff able to convince customers to sign up for higher rates.

The practice came to light in the 2017-18 Banking Royal Commission.

ASIC Deputy Chair Peter Kell said at the time that flex commissions “resulted in consumers paying very high interest rates on their car loans”.

“We were particularly concerned about the impact on less financially experienced consumers,” he said.

Echo Law partner Andrew Paull said the new class action was about holding Toyota Finance to account for putting in place dealer loan arrangements that it knew were unfair and against the interest of Toyota customers.

Flex commissions came to light during the banking royal commission. Picture: Supplied.

“There are hundreds of thousands of Toyota customers who took out dealership loans between 2010 and 2018 that were subject to these unfair arrangements, and who we say are worse off because of them,” he said.

“Most concerningly, it appears that these practices resulted in vulnerable customers, such as those with low financial literacy, paying the most inflated interest rates. Some of these loans are continuing today.

“The total extra costs paid by Toyota Finance customers is estimated to be in the hundreds of millions of dollars.

“We allege that by these practices, Toyota Finance has engaged in misleading conduct and has breached the prohibitions on unfair or dishonest conduct contained in Australia’s credit laws.”

Toyota customer Sheridan May said she paid 11 per cent interest per annum for a loan in 2015, far higher than the going market rate.

Toyota is not the only company to charge flex commissions. Photo: Contributed

“I had no clue that the dealer would get paid extra if they increased the costs on my loan,” she said.

“I had believed everyone was treated fairly. It was only later that I realised my loan was unusually expensive.”

“I’m a single mum too and am really not happy that they took advantage of me and so many others”.

A Toyota Finance spokesman said “Toyota Finance Australia Limited acknowledges that class action proceedings have today been served by Echo Law”.

“We will take the time to review the claim carefully before making any statement.”

Toyota customers with questions about their finance contract can contact Toyota Customer Service on 137 200 from 8:30am to 5.30pm, Monday to Friday.

Customers who want to participate in the class action can register their interest at Echolaw.com.au/toyota.

Originally published as Toyota owners ‘ripped off’ by flex commissions form class action