In Walker v DTGV1 Pty ltd trading as V1 Leasing (Credit)  VCAT 880 the Victorian Civil and Administrative Tribunal analysed the business and legal model of V1 which traded as Motor Finance Wizard in Dandenong and concluded that in this case relating to an April 2009 transaction its sales procedures were unjust and the transaction be set aside under the Consumer Credit Code.
The applicant had recently been discharged from bankruptcy. In 2009, she was receiving a disability pension from Centrelink. She lived in a house rented from the Office of Housing.
The Tribunal referred to the transcript of V1’s television advertising: "The advertisement repeats many times the name “Motor Finance Wizard” and the telephone number (using the letters corresponding to the numbers which spell out “1800 CAR LOAN”). It includes phrases such as “banks say no – Motor Finance Wizard says yes”. It describes the cars for purchase in glowing terms such as “runs smooth”, “looks great”, and “a real workhorse”. It is directed to those with credit problems. It says “even if you’ve had credit problems in the past or are receiving benefits, call 1800 CAR LOAN”. It does not use the word “lease”.".
Nevertheless V1 did not sell cars. It only leased used cars.
V1's documentation did not disclose interest or fees and charges. The Tribunal described the consumer lease as a 14-page complex legal document accompanied by the information statement required by the Code to be provided by the lessor to the lessee under a consumer lease. There was also an extended motor vehicle warranty, the terms of which contain significant limitations on V1’s liability to repair the car during the term of the lease.
The Tribunal found the lease was unjust and the deposit be returned after considering the length of the stay at the dealership (the applicant was there for about 5 hours), the delay in clearly explaining what the nature of the transaction was, the speed and inadequacy of explanations of the transaction given, the lack of real choice in car selection, and the lack of real opportunity given to read or understand the consumer lease.
The Tribunal decided that the transaction was a consumer lease not a credit contract:
"Was the transaction between the parties a credit contract to which the Code applies?
I find that it was not. It was not a sale by instalments or a loan. It was a consumer lease.
Was the transaction a deemed credit contract under s10 of the Code?
I find that it was not. It was a consumer lease which did not contain a right or obligation to purchase. The right to make an offer to purchase given by clause 8 of the lease, and set out in the offer to purchase form, was an offer which V1 had a discretion to accept or refuse. There is insufficient evidence for me to find that V1 had a practice of accepting all offers. On its proper construction, the consumer lease required the return of the car by Ms Walker at the end of its term, and did not give her an option only to return the car. I find that the transaction was a consumer lease.
Was the transaction an attempt to avoid the credit contract related provisions of the Code, and so itself void under s169?
I find that it was not. From the point of view of V1, the transaction was a genuine consumer lease. The Code does not prohibit consumer leases. It gives a choice to a business about whether to structure its transactions as credit contracts or consumer leases. To structure a transaction as a consumer lease is not to avoid the Code. "
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Posted 26th May 2011 by David Jacobson in legislation, responsible lending