ComCom To Launch Action Against Two Car Finance Lenders

In its most significant action in the car finance sector to date, the Commerce Commission will file civil proceedings in the High Court against Go Car Finance Limited and Second Chance Finance Limited alleging that the lenders breached the CCCFA when providing car finance to borrowers.

Commerce Commission GM Credit, Louise Unger, says these two separate cases follow long-standing investigations into these lenders – looking at whether they sufficiently assessed borrowers’ needs and financial means when providing car finance.

“In our view, both lenders have not been appropriately assessing loan affordability when making car finance available.

“Our legal action will address the potential for these lenders to have caused substantial financial hardship to Kiwi consumers.”

Ms Unger says as with all providers of consumer credit, car finance lenders have a responsibility under the Credit Contracts and Consumer Finance Act (CCCFA) to ensure any credit provided meets the borrower’s needs and objectives, and they must check that the borrower will be able to actually make payments under the loan without suffering substantial hardship.

The Commission is seeking declarations from the High Court that both Go Car Finance and Second Chance Finance breached the lender responsibility principles by failing to sufficiently assess whether consumers could afford their car finance between 2019-2022 and 2021-2022 respectively.

In addition, the Commission will be seeking declarations that Second Chance Finance breached its record keeping obligations, and its director failed to exercise their due diligence duty to ensure Second Chance Finance complied with its duties and obligations under the CCCFA.

"For the first time, we will be seeking pecuniary penalties from the High Court for these alleged breaches. We are also seeking orders for the lenders to pay statutory damages to named borrowers as well as the waiving of any outstanding amounts owed by borrowers where their vehicles have been repossessed.” 

Ms Unger says these have been significant investigations carried out by the Commission over the past two years which concluded in December 2023.

“We are now working through next steps in order to file civil proceedings in the coming months.”

As these cases are in the process of being put before the Courts, the Commission will not provide further comment at this stage.

Background
Lender Responsibility Principles
When providing credit, lenders must ensure they comply with the lender responsibility principles. The principles impose obligations on lenders when advertising, before entering into a loan, and during all subsequent dealings with borrowers and guarantors.

There is more information on the Commission’s website here: https://comcom.govt.nz/business/credit-providers/the-lender-responsibility-principles

Relevant cases in car finance sector

• In 2019, Hamilton finance company was warned over car loan and repossession
• In 2016, Christchurch car finance company entered a settlement to repay customers
• In 2013, Auckland-based car dealer was fined $22,000 for misleading customers.

Relevant cases under CCCFA Responsible Lending Principles

• In 2021, online lender Moola admitted failure to behave as a responsible lender
• In 2021, ASB admitted responsible lending failures and agreed to pay customers $8.1m
• In 2020, BNZ was warned over responsible lending and disclosure failures
• In 2020, ANZ admitted a breach of responsible lending obligations, and entered a settlement with the Commission
• In 2020, High Cost lender Ferratum admitted responsible lending breaches.

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