Melbourne-based firm Echo Law is seeking compensation for Toyota Finance customers, who they say were slugged hundreds of millions of dollars in extra costs because of a hidden dealership incentive.

Echo Law has lodged class action proceedings in the Supreme Court of Victoria, alleging Toyota Finance engaged in unfair and misleading or deceptive conduct, and entered customers into unjust loans.

It argues customers entered into the loans on a “causative mistaken belief” and the loans are therefore void and able to be rescinded.

For years, Toyota Finance and its dealerships had a “flex commission” arrangement, whereby dealers were encouraged to inflate the interest rates on customers’ loans, the law firm alleges.

The arrangement was undisclosed, and created a conflict of interest that ultimately led customers to paying significantly higher interest than they would have otherwise agreed, the firm 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,” Echo Law partner Andrew Paull said.

“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.”

NSW-based Sheridan May was among Toyota customers hit with inflated costs when her interest rate for a loan with the dealer was set at 11 per cent per annum in 2015, the firm said.

The rate was much higher than the going market rate as well as some other Toyota Finance loans, Echo Law alleges.

“I had believed everyone was treated fairly,” May said.

“It was only later that I realised my loan was unusually expensive.

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

Toyota has been contacted for comment.

– AAP