Australian car loan company facing ComCom action stops lending in New Zealand

Monday, 12 August 2024

An Australian car loan business facing civil action from the Commerce Commission has stopped lending in New Zealand.

Go Car Finance has posted a notice on its website announcing it would stop lending on August 16, but it would continue to collect on the nearly $140 million of loans it has already made to fund second hand car purchases in this country.

The business had raised anger among financial mentors from organisations like the Salvation Army and Christians Against Poverty, who compiled a dossier to hand to the commission in 2021 containing multiple examples of loans they said breached responsible lending laws.

In January, the commission announced it would file civil proceedings in the High Court alleging 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.

Financial mentor David Verry said mentors would view the exit of Go Car Finance as a battle won, but he said other lenders continued to cause damage in poorer communities.

Go Car Finance is owned by Australian company Solvar, whose shares are listed on the Australian ASX sharemarket.

In an update on July 23, Solvar told investors it planned to focus on its Australian business.

Solvar bought Go Car Finance in 2019, and said it had contributed some A$90m in cumulative earnings before interest, taxation, depreciation and amortisation.

“However, macroeconomic conditions in New Zealand have been challenging for an extended period which has created uncertainty for the foreseeable future,” it told investors.

“Solvar’s view is that there are now substantially better growth opportunities in the Australian market,” it said.

At the time it issued its strategic update, Solvar said there had been no material developments in the action by either the commission or the Australian Securities and Investments Commission, which is taking action against it in Australia.

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.

When the commission announced its action in New Zealand, Solvar said it related to “historical matters”.

New Zealand credit reporting company Centrix reported in July that demand for car loans was depressed, down almost 24% on the same time last year.

In recent years, Go Car Finance had started to attract media attention including for its use of car immobilisers, which it could use to remotely disable borrowers’ cars, if they fell 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.