Migrant workers forced to take out car loans, law centre says
Thursday, 1 May 2025
Community Law Otago has complained to the Commerce Commission and Financial Markets Authority about multiple migrant workers being trapped into taking out loans to buy new cars at the insistence of their employers.
The workers, who came to New Zealand to work in the construction industry on Accredited Employer Work visas, were told by employers they had to buy cars as part of their employment contract.
On arrival in New Zealand, they were taken to car yards and shown the cars they were required to buy, with finance arranged for them.
One of the migrant workers, who spoke to The Post on condition of anonymity, said he had no choice about what car to buy.
“I have only choice in the colour,” he said.
He would have preferred to buy a cheap, secondhand car, but felt he could not refuse to buy the car he was told to buy or risk losing his job and having to leave the country. It was a new MG3 with insurance and service plan for about $30,000.
Five migrant workers were referred to Community Law Otago (CLO) by the Citizens Advice Bureau after their employer went bust, leaving them without incomes to make loan repayments.
But CLO alleges that the loans to the men, who had no history of earnings in New Zealand, were made without the adequate affordability testing that is required by law, and has succeeded in getting one of the loans written off, and the fees and interest repaid on another.
Charlotte Whitaker from CLO said: “We are dealing with different lenders, different car sales, and different employers.”
The Commerce Commission confirmed it had received the complaint, and a spokesperson said: “The commission is considering this and engaging with the entity involved.”
Car loans are one of the key targets for the commission in its current action plan.
CLO has asked financial mentors across the country to look out for similar cases as it believes there could be many more. It has also written to ministers.
The anonymous worker, now living in Dunedin, said in his network of friends and acquaintances there were many more than the five cases CLO had seen.
One lender alone is believed to have issued more than 30 loans, but CLO said it had written the loans off, refunded borrowing costs and released security over workers’ cars.
It also sent apologies to the workers.
The workers involved were from countries including Sri Lanka, India and Bangladesh, the anonymous worker said.
“This is not only me. I know that is one I reckon it's 100 or 120 people on the same page,” he said.
He arrived in New Zealand in early 2023, and within three days of touching down had a new car, and a loan to repay.
“The client states he did not understand the credit contract he signed. He understood he needed a vehicle for work purposes however he was not informed of any other option than the one told to him,” Whittaker told the commission in her letter of complaint.
As well as investigating the lenders, CLO wants the actions of a credit broker and employers investigated.
“We are concerned of the scale of harm as there may be many others who are in the similar situation but don’t have advocates, know their rights, have not reached out for assistance and if they have, then have not been given the correct information,” CLO said to the commission.
“In short, we are unaware of how long this has been happening for and how many victims this behaviour has exploited.”
It said: “CLO believes that this may be the tip of the iceberg of a number of similar cases of oppressive conduct related to the CCCFA for car loans with migrant workers.“