In a shocking revelation that has allegedly left many Australians out of pocket, a Melbourne-based law firm, Echo Law, has launched a class action lawsuit against Toyota Finance.

They claimed the company has systematically overcharged customers through a hidden dealership incentive.

The lawsuit centred around a practice known as 'flex commission'.

This arrangement between Toyota Finance and its dealerships allegedly encouraged dealers to inflate customer loan interest rates.

A class action lawsuit has been filed against Toyota Finance. Image source: Toyota Australia.

Echo Law alleged that this arrangement was undisclosed and created a conflict of interest that led to customers paying significantly higher interest rates than they would have otherwise agreed to.

Furthermore, over 100,000 car owners have been unfairly burdened with these inflated loan costs, amounting to hundreds of millions of dollars in extra charges.

This 'flex commission' arrangement, meant that the higher the interest rate, the higher the commission the dealership receives.

If proven true, this meant that the extra money went directly into the pockets of the dealerships.

Echo Law Partner Andrew Paull said, 'There are hundreds of thousands of Toyota customers who took out dealership loans between 2010 and 2018 that were subject to these unfair arrangements, and who we say are worse off because of them.'

'Most concerningly, it appears that these practices resulted in vulnerable customers, such as those with low financial literacy, paying the most inflated interest rates.'

'Some of these loans are continuing today.'

One such customer is NSW-based Sheridan May, who found herself saddled with an inflated interest rate of 11 per cent per annum for a loan with the dealer in 2015.

Echo Law claimed this rate was much higher than the going market rate and other Toyota Finance loans.

'I had believed everyone was treated fairly,' May said.

'It was only later that I realised my loan was unusually expensive.'

'I’m a single mum too and am really not happy that they took advantage of me and so many others.'

Echo Law has lodged class action proceedings in the Supreme Court of Victoria, seeking compensation for allegedly affected customers.

The firm claimed that Toyota Finance engaged in unfair and misleading or deceptive conduct and entered customers into unjust loans.

The lawsuit argues that customers entered into the loans on a 'causative mistaken belief' and the loans are therefore void and could be rescinded.

If successful, this could mean significant compensation for affected customers and a major blow to Toyota Finance.

Key Takeaways

• Echo Law has initiated a class action lawsuit on behalf of over 100,000 car owners against Toyota Finance for imposing 'unfair' extra costs through a hidden dealership incentive scheme.
• The law firm alleged that between 2010 and 2018, a 'flex commission' arrangement led dealers to charge inflated interest rates on car loans, which resulted in customers paying significantly more than they should have.
• The firm contended that the practice targeted vulnerable customers, especially those with low financial literacy, who ended up with the most inflated interest rates.
• The class action has been lodged in the Supreme Court of Victoria, arguing that Toyota Finance's conduct was unfair and misleading, and the loans should be deemed void and rescinded. Toyota has been contacted for a response on the matter.

What are your thoughts on this issue? Share your experiences and thoughts in the comments below.

 

[Ian Crane-Luff]

It is not just Toyota finance, it's common practice in many dealerships especially when selling from used car lots

 

[Pat T]

The government should have maximum fees, rates and profit margins on EVERYTHING. There are so many shifty scumbags around that the vulnerable need protecting from.