ComCom Hits The Gas On Car Loans With Third Lender In Court

The Commerce Commission is progressing criminal proceedings in the District Court against El Cheapo Cars (trading as Ezybid Finance) in its third action in the car finance sector this year – alleging borrowers were not provided key information about their loans.

Commerce Commission Acting General Manager Credit, Sarah Bartlett, says El Cheapo – a Wellington-based motor vehicle trader and finance lender – breached its variation disclosure obligations under the Credit Contracts and Consumer Finance Act (CCCFA) when providing car finance to borrowers between 2015 and 2021.

“Many consumers rely on cars in their day to day activities – to get to work, pick up groceries, and to get around with their family. 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,” Ms Bartlett says.

Under the CCCFA, lenders have obligations to provide specific information (disclosure) to borrowers at key stages of the loan journey. This includes information about interest rates and fees, and when a loan amount or repayment schedule changes.

“Our investigation into El Cheapo found that borrowers were not provided key information when changes were made to existing loans. Customers would often increase their loan amount with El Cheapo to cover other costs that had come up, like buying new tyres, and El Cheapo did not give its customers disclosure of the changed terms. The disclosure should have included information on the repayment amounts, interest owed and the loan period – which in most cases had increased,” Ms Bartlett says.

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

The Commission is seeking a fine and compensation for the 478 borrowers who did not receive variation disclosure, following agreed changes to the terms of their existing loans.

El Cheapo is cooperating with the proceeding and has entered guilty pleas to the seven charges the Commission filed against it. As this case is now before the Court, the Commission cannot comment further.

Background

The CCCFA protects consumers when they borrow money or buy goods on credit. It sets out the rules that must be followed by lenders when they provide loans.

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, with allegations that both lenders also breached the CCCFA when providing car finance to borrowers.

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