El Cheapo Cars: A Wake-Up Call for Lenders

Wednesday 4 June, 2025

The sentencing of El Cheapo Cars in the Porirua District Court last week sends a clear message to lenders across New Zealand. Failing to uphold responsibilities under the Credit Contracts and Consumer Finance Act 2003 (CCCFA) is not just a technical breach, it can have serious financial and legal consequences.

El Cheapo Cars, a Wellington-based motor vehicle dealer and finance lender (trading as Ezybid Finance), was fined $115,000 and ordered to pay more than $341,000 in compensation to 478 affected borrowers. These penalties follow guilty pleas to seven charges laid by the Commerce Commission. All of the charges relate to the company's failure to meet its variation disclosure obligations between 2015 and 2021.

Disclosure Failures Undermine Borrower Rights

The charges stem from repeated failures to provide updated information when loan terms were varied. Customers often increased their loans to cover costs such as tyres or registration, yet were not told how their repayment amounts, interest charges, or loan terms would change.

Under the CCCFA, lenders must provide clear, written disclosure of any changes before a borrower agrees to a variation. Judge Sainsbury emphasised the fundamental role of disclosure in protecting borrowers and ensuring transparency. Without proper disclosure, lenders may lose the right to charge interest or enforce the loan until the issue is corrected.

Understanding the Borrower’s Needs

Lenders are required to make reasonable inquiries to ensure loans meet a borrower’s needs. This includes understanding the purpose of the loan, how much the borrower needs, whether the borrower can afford the loan, any additional products such as insurance, and how repayments will be made.

In this case, borrowers were agreeing to top-ups without understanding how their obligations were changing. These assessments are not a one-off. The CCCFA and the Responsible Lending Code, updated in July 2024, require lenders to reassess suitability every time the contract changes.

What Should Lenders Be Doing Now?

The motor vehicle finance sector remains a priority for the Commerce Commission. It has also brought cases against Go Car Finance and Second Chance Finance.

Lenders should use this moment to review their compliance processes. Practical steps include:

• Ensuring loan variations are clearly disclosed in writing
• Training staff on affordability and suitability assessments
• Using plain language in all communications
• Monitoring third-party agents and dealers
• Keeping clear records of all inquiries, disclosures, and borrower agreements
• Providing extra support for vulnerable borrowers

Final Thoughts

The El Cheapo sentencing is a reminder that responsible lending is not just a compliance issue. It is about ensuring fairness, clarity, and protection for borrowers, especially when they are financially vulnerable.

Our team can help you review your consumer contracts for compliance with consumer protection laws, including the CCCFA. Get in touch with one of our experts below if you are unsure whether your lending terms meet the legal requirements.