ComCom targets car loans

Third lender faces court action

ComCom targets car loans

The Commerce Commission (ComCom) has initiated criminal proceedings against El Cheapo Cars (trading as Ezybid Finance) in the District Court, marking its third action in the car finance sector this year.

ComCom alleged that El Cheapo failed to provide key loan information to borrowers.

El Cheapo’s breach of disclosure obligations

El Cheapo, a Wellington-based motor vehicle trader and finance lender, allegedly breached its variation disclosure obligations under the Credit Contracts and Consumer Finance Act (CCCFA) between 2015 and 2021.

Commerce Commission acting general manager of credit Sarah Bartlett (pictured above) stressed the importance of protecting consumers in significant financial transactions like car purchases.

“Many consumers rely on cars in their day-to-day activities...,” Bartlett said. “It’s crucial consumers are protected when purchasing a car as it’s often essential to their lives and a significant financial commitment. The current cases against El Cheapo, Go Car, and Second Chance Finance before the courts should send a strong signal to the sector about their obligations to consumers.”

See LinkedIn post here.

ComCom’s investigation findings

“Our investigation into El Cheapo found that borrowers were not provided key information when changes were made to existing loans,” Bartlett said. Customers often increased their loan amounts to cover additional costs like new tyres, but were not informed about the new repayment amounts, interest owed, and extended loan periods.

“Customers need to understand the terms of their contracts, and the effect of any changes they’re agreeing to,” Bartlett said.

“El Cheapo’s failure to provide information about the changed terms caused potential financial harm for borrowers, as they were unable to make informed decisions around the terms of the agreement and money they were borrowing.”

Seeking penalties and compensation

ComCom is seeking a fine and compensation for 478 borrowers who did not receive proper disclosure. El Cheapo is cooperating with the proceedings and has entered guilty pleas to the seven charges filed against it.

Background on CCCFA

CCCFA sets rules that lenders must follow when providing loans to protect consumers.

The commission opened its investigation into El Cheapo in October 2021, following a customer complaint.

Earlier this year, the commission filed civil proceedings against Go Car Finance and Second Chance Finance in the High Court for similar breaches.

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