Westpac Banking Corporation has agreed to a settlement of A$130 million (approximately $81.84 million) in response to a class action lawsuit concerning its auto finance practices. The lawsuit, initiated by law firm Maurice Blackburn in 2020, alleged that between March 1, 2013, and October 31, 2018, Westpac and its subsidiary, St George Finance, permitted car dealers to increase interest rates on auto loans to earn higher commissions.
These “flex commission” arrangements allowed dealers to set higher interest rates, resulting in consumers paying more over the term of their loans. Such practices were criticized for prioritizing dealer profits over consumer interests. In response to regulatory scrutiny, Westpac ceased paying these commissions in 2018 and stopped new lending through its auto finance division in 2022.
The settlement, pending court approval, concludes the last of Westpac’s litigations related to the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry. The bank had provisioned for this settlement in its financial updates as of December 31, 2024.
This case is part of a broader industry trend addressing unethical lending practices. In October 2024, ANZ, another major Australian lender, agreed to an A$85 million settlement over similar allegations concerning car loans issued between 2011 and 2016.
The Australian Securities and Investments Commission banned flex commissions in 2018, following findings that such practices led to consumers being charged higher interest rates without their informed consent. These legal actions underscore the financial sector’s shift towards more transparent and fair lending practices, aiming to protect consumers from exploitative arrangements.
