Dealer admits finance charges
The Commerce Commission has announced it 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.
In each case, the commission alleges lenders did not provide key information to borrowers about their loans.
Sarah Bartlett, the commission’s acting general manager credit, says El Cheapo – a Wellington-based dealer and finance lender – breached its variation disclosure obligations under the Credit Contracts and Consumer Finance Act (CCCFA) when providing finance to borrowers between 2015 and 2021.
The commission, which opened its investigation into El Cheapo in October 2021, 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.
It says El Cheapo is co-operating with the proceeding and has entered guilty pleas to the seven charges the commission filed against it.
“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,” says Bartlett.
“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.”
Under the CCCFA, lenders have obligations to provide specific information to borrowers at key stages of the loan journey. This includes details 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,” explains Bartlett.
“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.”
She adds that consumers need to understand the terms of their contracts and the effect of any changes they agree 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.”.
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.
