Motor vehicle financier’s breaches impacted hundreds of borrowers, Commerce Commission notes
The Porirua District Court has sentenced El Cheapo Cars, a Wellington-based motor vehicle trader and finance lender that pleaded guilty to seven charges under the Credit Contracts and Consumer Finance Act 2003 (CCCFA).
After receiving a customer complaint, the New Zealand Commerce Commission began investigating El Cheapo in October 2021, according to a media release. The commission then brought seven charges under the CCCFA, which seeks to safeguard consumers borrowing money or purchasing goods on credit and imposes rules for lenders offering loans.
“One of the commission’s enforcement priorities is to take action where we consider motor vehicle finance lenders have not met their obligations under the CCCFA,” said Vanessa Horne – the Commerce Commission’s general manager for competition, fair trading, and credit – in a media release.
“We are particularly focussed on motor vehicle lenders who are providing credit to vulnerable consumers,” Horne added.
The commission said El Cheapo failed to give borrowers important information regarding their loans and violated its variation disclosure obligations under the CCCFA when offering personal and vehicle finance between 2015–21.
“For many Kiwis the purchase of a car is one of the biggest financial commitments they will make,” Horne said in the commission’s media release. “The CCCFA is there to protect consumers when they borrow money or buy goods on credit, and under the CCCFA, consumers have a right to be provided upfront information about any changes to their loan.”
In its media release, the commission shared that the court ordered El Cheapo to pay a fine of $115,000 and compensation of $341,931.46 to hundreds of impacted borrowers.
“Disclosure obligations are among the most fundamental protections under the CCCFA, particularly those related to ensuring consumers are aware of their rights and obligations under the consumer credit contract,” Judge Noel Sainsbury said.
According to Horne, this case is particularly significant since the commission deems protecting vulnerable consumer groups a key priority.
In its media release, the commission said it would soon contact the parties who might be eligible for compensation, specifically borrowers with loans with El Cheapo that were varied between 2015–21.
“This case should send a strong signal to motor vehicle financiers that non-compliance with disclosure obligations will not be tolerated,” Horne said in the media release. “Transparency and accountability are fundamental to responsible lending and are key to building consumer trust and upholding market integrity.”
The commission noted that it also commenced civil proceedings before the High Court against Go Car Finance and Second Chance Finance. In these cases, the commission claimed that the two lenders likewise committed CCCFA breaches when offering car finance to their borrowers.
