Login
ISCOVER
The big four bank has agreed to settle its Esanda class action brought against it in 2020 for $85 million.
ANZ has reached an agreement to settle its class action relating to the use of flex commissions in dealer-arranged Esanda car loans.
While ANZ sold the Esanda Dealer Finance portfolio to Macquarie in 2016, the class action – brought by class action law firm Maurice Blackburn Lawyers – focused on the period from 1 January 2011 to 31 March 2016.
The agreed settlement will see ANZ pay $85 million, covered by existing provisions held at 30 September 2024.
The settlement is without admission of liability and remains subject to court approval.
Confirming the settlement, class action law firm Maurice Blackburn Lawyers said the case was centred on “predatory lending practices that saw car dealers sting customers with high-interest loans involving secret flex commissions kickbacks from the bank”.
“Flex commission arrangements allowed car dealers to set the interest rate and loan term on car loans. The higher the interest rate and the longer the loan term, the greater the commission received by the dealer. These arrangements were banned by ASIC on 1 November 2018 and were a subject of inquiry at the Financial Services Royal Commission,” the law firm said.
Maurice Blackburn’s national head of class actions Rebecca Gilsenan said the settlement was a historic win for consumers who had paid far too much for their car loans.
“We are very pleased to have achieved this result for consumers. They had a right to expect that dealers were offering the best rate because they understand the roles of car dealers and lenders are distinct. We acknowledge that ANZ has now put this right for customers,” Gilsenan said.
This is not the first Esanda court case that ANZ has settled.
In 2018, the Australian Securities and Investments Commission (ASIC) reached a settlement with the bank after it admitted 24 breaches of responsible lending provisions.
ASIC had begun civil proceedings in the Federal Court against ANZ after alleging that its former car finance subsidiary Esanda “did not take reasonable steps” to verify customers’ financial situations submitted in 12 car loan applications where “it had reason to doubt the reliability of information from the particular broker businesses”.
The lender then paid a total of $5 million in remediation to approximately 320 eligible customers and paid $390,000 of ASIC’s costs.
Several brokers were banned and/or jailed for fraud for their involvement in providing Esanda with fraudulent information.
Following this, the corporate regulator reiterated its view that lenders should be held accountable for breaches of responsible lending obligations, irrespective of whether the loan was broker-originated.
Flex Commission class actions continue
A Flex Commission class action trial against Westpac Banking Corporation and St.George Finance and Macquarie Leasing Pty Ltd is also scheduled to begin later this month in the Victorian Supreme Court.
This class action is also being brought by Maurice Blackburn.
“We will continue to fight for customers of Westpac and Macquarie to be justly compensated for secret commissions paid by the banks that had them overpaying because of predatory car yard finance practices,” she said.
The plaintiffs, on behalf of group members in all three class actions, allege that flex commissions were unfair and unlawful and resulted in consumers paying higher interest rates on their car loans than they otherwise would have. As a result, they are claiming compensation and other relief for those who have been affected.
[Related: Former finance broker fined for fraud]
JOIN THE DISCUSSION