THE Victorian Automotive Chamber of Commerce (VACC) has called on the Australian Financial Complaints Authority (AFCA) to investigate the practices of vehicle leasing companies suggesting that consumers paying for their cars through some brokers and third party fleet-lease operators are being charged very high fees and costs that are mostly hidden within the paperwork.

The VACC has pointed out that many people leasing their car through their workplace believe they are getting the best possible deal because they perceive there is a benefit in the buying power of multiple purchases by the employer, but scrutiny of some lease deals shows that the purchase prices are high compared with what they would have paid at the dealership and that there are many hidden extras packed into the lease payment.

The VACC said that dealers see examples of “opportunist charging” hidden under a single monthly lease payments “almost every day”.

The chamber told AFCA there are systemic flaws in the sector, that the problem for consumers is growing and that consumers are often “being misled by intermediary vehicle lease brokers in the lease of a new motor vehicle from a franchise dealer”.

“This issue comes to light when consumers choose, or are directed by their employers, to enter a new vehicle leasing arrangement with an independent broker or credit intermediary.

“New vehicle dealers regularly encounter consumers (almost daily), who have been affected by what can be considered as opportunistic intermediary brokers.

“It is the view of VACC that many of these brokers could be breaching many of their obligations under the National Consumer Credit Protection Act 2009 (NCCP).

“VACC sees this to be an emerging issue facing consumers and dealers in finance lending for 2021 and beyond,” the chamber said.

Data from the Banking Royal Commission shows that 90 per cent of all vehicle purchases in Australia are financed with 39 per cent of those deals being written by car retailers and 61 per cent written by other sources including fleet leasing companies and brokers.

The VACC said that members of its car retailing divisions, the Victorian Automobile Dealers Association (VADA) witness firsthand the level of consumer detriment that misinformation has on car buyers daily – often resulting in major financial losses due to dealings with lease brokerage firms.

“The purpose of the finance broker should be to act as an intermediary between borrowers, lenders and their loan products. They should assist and advise borrowers on the loan application process and negotiate interest rates on loans, including car loans.

“However, the reality suggests that on a regular and systemic basis, consumers do not have access to this type of service provision – instead they are experiencing the following issues:

• No documented or written advice regarding the finance interest rate is provided to a consumer.
• The charging of exorbitant interest rates ranging from 8-15 per cent.
• Unclear or confusing interest rate calculations or charges that were not previously advised.
• No documented advice on establishment fees and the monthly management fee.
• The bundling of products like lease protection or vehicle extras that the consumer has no previous knowledge of, or opportunity to decline.
• Exorbitant early exit fees.
• Payment of a referral or a commission that is not declared to the consumer. This issue is particularly aggrieving for both consumer and dealer as the undeclared fee is not offset against the price of the vehicle, subsequently significantly impacting the dealer’s margin.
• When there has been no disclosure of the brokers benefit, the arrangements could fall foul
• of criminal laws (which apply in all six states).
• Insisting that consumers travel from regional or remote Victoria to metropolitan Melbourne to collect a vehicle. VADA members advise that it is common for a consumer to travel from, for example, Swan Hill to Ferntree Gully at the demand of the broker.”

It is VACC’s view that consumers are being severely disadvantaged by breaches and noncompliance of brokers under section 121 of the NCCP, and that unregulated intermediaries should be captured under section nine of the NCCP.

The submission to the AFCA said members of the VADA had nominated Toyota Financial Services (TFS) as a best practice example for consumer finance accessibility and transparency.

“It is the view of members of VADA that TFS is a best case example of a lease company who actively and transparently informs the consumer of all charges associated with a lease vehicle.”

By John Mellor