Shine Lawyers is launching a class action alleging that Westpac and its subsidiaries, as well as another finance company, breached their obligations under consumer credit law by failing to disclose to consumers the true nature of their commission structures when working with car dealers.

The firm announced yesterday that a claim would be filed in the Federal Court in coming weeks and is open to car buyers who took out a loan for personal use through their car dealer between July 2014 and November 2018 with the following banks or finance companies: Westpac, St George Bank, Bank of Melbourne or Capital Finance Australia.

Westpac was criticised in the Hayne royal commission report for continuing to offer flex commission arrangements to car dealers until they were outlawed in November 2018, even though it accepted earlier that the practice could be unfair.

Flex commissions gave dealers a cut of the interest payable if they could persuade the borrower to pay a higher rate than the lender’s base rate. In the Royal Commission’s view that was an arrangement that simply added cost for the borrower, who knew nothing about the arrangement.

Shine Lawyers class action practice leader Vicky Antzoulatos said in a statement yesterday: “If you bought a car from a dealership using ‘in-store’ finance from July 2014 to November 2018, you may have been the victim of a flex car loan rort.

“Under the now-banned scheme, dealerships spruiked cars with finance, while failing to disclose that the interest rate on the loans was arranged with the lender in exchange for commissions.”

“In some cases, customers who bought the same car or a vehicle of similar value on the same day were charged between 6.5 per cent and 15.5 per cent interest over and above the base rate.”