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Toyota hit with class action over finance loans

A class action has been lodged against Toyota Finance in the Supreme Court of Victoria, after customers over an eight-year period were allegedly sold inflated and unjust loans.

user iconLauren Croft 23 February 2024 Big Law
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The class action, filed by Echo Law, alleges that hundreds of thousands of customers paid increased interest on loans and that there was an undisclosed “flex commission” arrangement between Toyota Finance Australia and its dealerships, which encouraged the inflation of interest rates on customer loans.

This arrangement created a conflict of interest between the dealer and the customer that should have been disclosed and resulted in customers paying significantly higher interest fees, said Echo Law partner Andrew Paull.

“This class action is about holding Toyota Finance to account for putting in place dealer loan arrangements that it knew were unfair and against the interest of Toyota customers,” he 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.

“The total extra costs paid by Toyota Finance customers is estimated to be in the hundreds of millions of dollars.”

The class action alleges that from 2010 to November 2018, Toyota Finance had an arrangement with its dealers under which there was a “base rate” for interest fixed between the dealer and the finance company – but the dealer could adjust the rate offered to the customer to be above the base and would be awarded a higher commission if they were successful.

These “flex commission” arrangements were criticised strongly during the 2017–18 banking royal commission, which focused on arrangements between Westpac and car dealerships that the bank admitted created “unfairness”. In November 2018, these types of arrangements were banned by regulators.

“We allege that by these practices, Toyota Finance has engaged in misleading conduct and has breached the prohibitions on unfair or dishonest conduct contained in Australia’s credit laws,” Mr Paull added.

Class action member Sheridan May was sold a Toyota Finance loan when purchasing a car in 2015. The interest rate on the loan was set at 11 per cent per annum, much higher than some other Toyota Finance loans, as well as the market rate for secured car loans.

“I had no clue that the dealer would get paid extra if they increased the costs on my loan. I had believed everyone was treated fairly. It was only later that I realised my loan was unusually expensive,” she said.

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

Anyone who entered into a vehicle loan, arranged by a car dealership, from Toyota Finance between 2010 and November 2018 has been encouraged to register for the class action.

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