'Don’t do this to me I have kids' - Nalini's highway to financial hell

We’re sorry, this feature is currently unavailable. We’re working to restore it. Please try again later.

Advertisement

This was published 6 years ago

'Don’t do this to me I have kids' - Nalini's highway to financial hell

By Sarah Danckert

It was July 2012, and Tullamarine single mother-of-two Nalini Thiruvangadam needed a new car.

The tyre well of her old, banged up Mitsubishi Magna had recently caught on fire with her young sons in the back, giving them all a terrible fright.

What happened next to Ms Thiruvangadam, a personal carer for the elderly, has made her a key witness in the banking royal commission as it turns its focus to car loans.

Nalini Devi Thiruvangadam with the car she bought that triggered a downward financial spiral.

Nalini Devi Thiruvangadam with the car she bought that triggered a downward financial spiral.

With her Magna now unsafe Ms Thiruvangadam told the commission on Wednesday that she wanted a reliable vehicle to visit clients and ferry her boys to and from school.

But with her casual employment and Centrelink payments providing only a meagre income and an existing credit card debt she struggled to get a loan despite asking eight different lenders for finance, including her own bank, Westpac.

Finally she found a “friendly car dealer” 50 kilometres away on the other side of Melbourne who said he could help despite her telling him of her struggle to get a loan.

“He said ‘no worries’, you come to my car dealership and you will drive home tonight,” Ms Thiruvangadam said.

But it would be a world of worry. Ms Thiruvangadam would buy a second hand Ford Focus. The car turned out to be a lemon and the loan she took out to buy it would cost her $259.98 per fortnight – or 30 per cent of her fortnightly income.

They would say they are coming now to your doorstep and they’re going to tow your car away

Nalini Thiruvangadam
Advertisement

The loan was from Bank of Melbourne, a Westpac subsidiary. Within three months, she would fall behind in payments.

Ms Thiruvangadam broke down in the witness box as she explained that she fell seriously behind in her rent and was forced to borrow money from family and sell jewellery gifted to her and her sons by her mother trying to meet the loan repayments.

“[The Bank of Melbourne] used to call me several times,” Ms Thurivangandam said

“They would say they are coming now to your doorstep and they’re going to tow your car away. I used to cry saying, 'Don’t do this to me, I have two kids'. It’s very hard."

Ms Thurivangandam told the royal commission that on the day she purchased the car, she spent hours in the office of the dealer manager but he was on the phone most of the time.

“All I was told was just to sign here, sign there,” Ms Thiruvangadam told the commission.

Loading

“Nothing was explained to me."

That meant she did not know about the fortnightly fee repayments, interest rates, fees or penalties
if she missed a payment, the commission heard.

She was also not told the car dealer would receive a higher payment from the bank if he jacked up the interest rate above the minimum rate, through an arrangement known as flex commisisons.

The car dealer used a single pay slip to verify Ms Thiruvangadam’s income and did not verify the Centrelink payments or take into account her living expenses including rent.

Ms Thiruvangadam, who had asked to buy a new car, also didn’t know she had been sold a show car that had been on thousands of test drives.

“I went back home [and] I went through a few documents and I realised it’s a demo car and in one of the pages it said it has done so many kilometres and I didn’t expect that,” she said.

“So, I spoke to the manager and said I don’t want this car. He said I have to take it."

Within six months of buying the car, it started breaking down. Despite costly repairs, the car continues to stall at inopportune times.

Help sought

Years later, in 2017, Ms Thiruvangadam enlisted the help of consumer advocacy group Consumer Action Law Centre who complained to Westpac over breaches of responsbile lending laws.

That year, Westpac sent Ms Thiruvangadam a letter with a $20,000 settlement offer. She also got to keep the Ford Focus.

“We have reviewed all of the information that we have been provided and we agree the loan should not have been approved,” Westpac said in its letter to Ms Thiruvangadam’s CALC lawyers.

“Therefore we must consider what should be done to put Ms Thiruvangadam in the position she would have been had the loan not been approved."

Westpac head of car loans Phillip Godkin later told the commission that car dealers who work with Westpac or any other finance provider receive a ‘flex commission’ that allows the dealer to set the interest rate.

Westpac's Phillip Godkin

Westpac's Phillip Godkin Credit: Joe Armao

The Australian Securities and Investments Commission banned flex commissions from November 2018 following a review that found they drove poor customer outcomes.

Commissioner Kenneth Hayne quizzed Mr Godkin about how Westpac had responded to that review.

“You have recognised that there is a problem with poor customer outcomes?” Commissioner Hayne asked, to which Mr Godkin replied: ‘Yes, absolutely.”

Commissioner Hayne then asked: “What have you done in response to the observation that there is a significant risk to unfair customer outcomes?”

Mr Godkin said Westpac was still using flex commissions with car dealers and would do so until November.

“Because we believe the solution to this needs to be an industry solution,” Mr Godkin said.

He added Westpac had put a cap on pricing of the loans.

“The second [change to Westpac’s processes] was to roll out code of conduct and customer fairness trading across our business manager network and make that compulsory and that was in late 2015,” Mr Godkin said.

Counsel Assisting the Royal Commission Albert Dinelli.

Counsel Assisting the Royal Commission Albert Dinelli.

Under questioning from counsel assisting the royal commission, Albert Dinelli, Mr Godwin agreed car dealers are generally exempt from responsible lending obligations.

But Mr Godkin added Westpac had relied on the business managers of car yards to ensure loan applications were in line with the bank’s requirements so the bank could ensure the loans were responsible.

“It has always been the requirement for the business manager to have a comprehensive conversation with the customer and we had relied on the verification process as evidence the business manager had that conversation,” Mr Godwin said.

He agreed that in the case of Ms Thiruvangadam the bank did not properly verify her financial circumstances.

Quick process

At the same time as Mr Godkin was testifying Faifax Media met Harry Singh outside a Melbourne caryard.

He said the entire process for obtaining a loan for a new Nissan took just two days.

Mr Singh bought the Pathfinder for his courier company with finance provided from a Nissan dealership.

"They asked for my company profile, its credit history, ABN number, and how old the company was. They found out the other details by themselves," he said.

The contract was small but complicated.

"It was four or five pages long, but they used a lot of technical terms," he said.

Singh said the interest rate was set at "approximately 7 per cent" and it was mutually decided that he would pay the amount back over five years.

with Shiamak Unwalla

 

Most Viewed in Business

Loading