‘Go Car kept cropping up time, and time, and time again’

Sunday, 21 January 2024

ANALYSIS: Covid got financial mentors from around the country networking together in a way they had never done before.

Unable to see clients, mentors began virtual networking meetings to share war stories, and tips on how they helped people get out of problem debt.

They noticed a disturbing pattern. The same loan company name came up again and again: Go Car Finance.

Many financial mentors had clients who were struggling with loans from Go Car Finance, and they decided to collect a dossier of cases to hand to the Commerce Commission.

The commission polices lending laws, including responsible lending laws that are supposed to prevent finance companies overloading borrowers with debt.

The mentors, who were from organisations like the Salvation Army and Christians Against Poverty, handed that dossier over in late 2021.

Now, the Commerce Commission has announced it will file civil proceedings in the High Court. It alleges that Go Car Finance breached lender responsibility principles under the Credit Contracts and Consumer Finance Act by failing to sufficiently assess whether consumers could afford their car finance on loans it made in 2019, 2020, 2021 and 2022.

The Commission’s general manager, Louise Unger, said the commission would be seeking pecuniary penalties from the High Court for these alleged breaches.

It was also seeking orders for Go Car Finance to pay statutory damages to borrowers, and the waiving of any outstanding amounts owed by borrowers where their vehicles have been repossessed.

Go Car Finance is owned by Australian ASX sharemarket-listed company Solvar.

In a statement on the ASX Solvar acknowledged the commission’s action, saying it related to “historical matters”.

“Both Solvar and Go Car Finance understand the importance of protecting consumers and take out regulatory obligations seriously. The Group believes it complied with and continues to comply with lender responsibility obligations,” it said.

The statement, authorised by Solvar’s board, said it had not yet received the statement of claim from the commission, and was unable to comment further at this stage.

Solvar’s Money3 lending operation was facing action across the Tasman from the Australian Securities and Investments Commission for alleged responsible lending failures, its 2023 annual report said.

One of the mentors who compiled the dossier was David Verry.

He said after waiting so long to see the commission take action, mentors were relieved, rather than delighted by the commission’s action.

“We’re gratified something’s finally happened.

“At least it’s something where the collective coming together of financial mentors, presenting the dossiers, and the systemic issues, has been positive.”

The mentors did not really come together as a wider team until Covid hit, he said.

“We started to talk to each other out of our individual silos, and this name Go Car kept cropping up time, and time, and time again.”

After the dossier was handed to commission investigators, mentors waited with frustration as the months passed.

They carried on working behind the scenes, taking complaints against Go Car Finance to the Financial Services Disputes Limited (FSCL) complaints scheme it belonged to.

And they won victories.

“A lot did get resolved satisfactorily. A lot still didn’t,“ Verry said.

But case notes published by FSCL do not name the lenders involved, so even when they won victories, they did not hit the media.

Christians Against Poverty advocacy team leader Sam Mani said that in the last two-and-half years they had successfully disputed more than 100 unaffordable loans.

This had resulted in $850,000 of debt being written off for clients, he said.

“However, by this stage the harm to clients is already done, so we hope this enforcement action sends a clear message to these lenders to behave responsibly.”

Not all of that debt was Go Car Finance debt, but some of it was, including a case covered by Stuff, which resulted in the lender being told to write off the borrower’s remaining debt of $14,000.

Mani said the woman’s debt quickly spiralled out of control as the repayments were so high.

Media coverage of the case also shone the spotlight on Go Car Finance’s use of car immobilisers, which allowed it to remotely immobilise cars, when borrowers were behind on repayments.

In May last year, Go Car Finance came into the sights of Consumer NZ, which used a Go Car Finance loan as an example, when it warned consumers to beware when shopping around for car loans.

Verry hoped the commission would be successful in its bid to have the High Court rule to wipe out the remaining debts of borrowers in cases where Go Car Finance was proved to have breached responsible lending rules.

“That’s the thing that will send a message to other lenders where inappropriate lending has taken place,” he said.

“If it’s successful don’t expect to have a debt overhang that you can still go back and get money out of the people you should never have lent money to in the first place.”

Unger described the court action as its most significant action in the car finance sector to date, saying it followed a two-year investigation, though she did not mention the part the mentors had played.

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

The network of mentors continues to meet, and continues to provide information to the commission on lenders it believes are failing to meet their legal obligations.

Verry said there had been change at Go Car Finance.

“They have been on a bit of a campaign of trying to placate everybody for some months now, getting financial mentors in to talk to them.”

There had also been a change of chief executive, with Australian Scott Baldwin taking the helm.

In Go Car’s Auckland head office on Broadway in the upmarket shopping district of Newmarket, it has a board of mission statements.

“We’re trusted and straight up. We’re open, we’re honest, we’re 200% ethical and we always do the right thing,” it says.

ACTION AGAINST LENDERS

The Commerce Commission’s case register shows the watchdog has taken 113 “enforcement” actions against lenders since 2000, but few have been against car financiers.

The register shows action against many well-known lenders, including all the big banks, as well as against some lenders that are not household names.

ASB, Bank of New Zealand, Kiwibank, ANZ, Westpac, TSB, and Kookmin Bank have all been on the end of commission enforcement action for errors that led to them having to refund customers a combined $71 million.

The action only covers a small proportion of all lenders, though many of the 465 certified lenders and mobile traders that existed at the start of this year (roughly one for every 11,000 people) have never had action taken against them.

Only a handful of the cases have been against lenders that specialise in financing used cars. That has disappointed financial mentors, who say car loans are too often the form of finance that leaves families struggling to make ends meet.

In 2019, We Care Finance got a warning letter after the commission considered it failed to lend responsibly when it made a loan in 2017, which left the borrower that had insufficient income to make repayments.

In 2016, Dealer Finance Limited agreed to repay “at least $440,000” to customers who were overcharged interest on their loans from 2005.

In 2013, a money-lending car dealer was fined $22,000 and ordered to pay $2,000 reparation in the Auckland District Court after admitting to a number of charges including misleading customers, selling unnecessary warranties, and charging higher interest rates than those agreed.

Many of the investigations undertaken by the commission only ended up in lenders being sent warning letters, or the lenders agreeing to “enforceable undertakings” where they refund borrowers for fees and interest they should not have charged, and make pledges of their future good behaviour.

Others end in “settlement” where lenders put an end to potential court action by doing a deal with the commission, sometimes doing so while making it clear they don’t agree with the commission’s views.

Westpac appears in the list more than any other lender, having entered into two settlements and one enforceable undertaking with the commission.