El Cheapo in trouble with Commerce Commission over car finance

El Cheapo has been taken to court over claims relating to car finance borrowers received between 2015 and 2021. Photo / NZME

The Commerce Commission says it’s taking El Cheapo Cars to court as it cracks down on car finance issues.

The commission has alleged borrowers were not provided key information about their loans.

The Herald called El Cheapo this morning, but the person who answered said the company had no comment to make.

It is co-operating with the case, according to the commission.

Sarah Bartlett, of the commission, said El Cheapo, a Wellington-based car trader and finance lender, breached disclosure obligations under the Credit Contracts and Consumer Finance Act (CCCFA).

She alleged these breaches happened when El Cheapo gave car finance to borrowers between 2015 and 2021.

“It’s crucial consumers are protected when purchasing a car as it’s often essential to their lives and a significant financial commitment,” Bartlett said in a statement.

“The current cases against El Cheapo, Go Car and Second Chance Finance before the courts should send a strong signal to the sector about their obligations to consumers,” Bartlett said.

The commission said lenders were obliged to provide specific information to borrowers at key stages of the loan journey.

That included information about interest rates and fees, and when a loan amount or repayment schedule changed.

”Our investigation into El Cheapo found that borrowers were not provided key information when changes were made to existing loans.

“Customers would often increase their loan amount with El Cheapo to cover other costs that had come up, like buying new tyres, and El Cheapo did not give its customers disclosure of the changed terms,” Bartlett added.

“The disclosure should have included information on the repayment amounts, interest owed and the loan period — which in most cases had increased.”

She said customers should be able to understand the terms of their contracts, and the effect of any changes they were agreeing to.

“El Cheapo’s failure to provide information about the changed terms caused potential financial harm for borrowers, as they were unable to make informed decisions around the terms of the agreement and money they were borrowing.”

The commission said it was seeking a fine and compensation for 478 borrowers who did not receive variation disclosure, after agreed changes to the terms of their existing loans.

It said El Cheapo entered guilty pleas to seven charges.

The commission said El Cheapo was trading as Ezybid Finance.

It said this was its third action in the car finance sector this year.