Car finance scams and predatory lending in New Zealand
Two different problems get lumped together. A scam is fraud, usually someone asking for money before a loan exists. Predatory lending is a real lender doing the wrong thing, such as skipping affordability checks or hiding costs. The warning signs, and where to go for help, differ for each.
The short answer
When people search for car finance scams in New Zealand, they usually mean one of three things:
- Fraud: a fake lender or fake broker who takes money and delivers nothing.
- Car-buying fraud: a fake seller, or a seller who hides debt on the car.
- Predatory lending: a real, registered lender that lends in a harmful way.
Each has a different fix. Fraud is a matter for your bank and the authorities. Predatory lending is a matter for the lender’s complaints process, a dispute resolution scheme and the Commerce Commission. This page covers all three, in plain words.
If you are short of time, here are the five checks that stop most problems:
- Never pay a fee to someone who has not yet given you a loan contract.
- Check the lender on the Financial Service Providers Register.
- Read the disclosure statement before you sign anything.
- Check the car on the PPSR.
- Ring your bank before sending money you are unsure about.
1. Advance-fee loan scams
This is the classic. A website, text or social media post offers a loan to people with poor credit. After you “apply”, you are told you are approved but need to pay a fee: insurance, processing, a “refundable deposit”, a tax, a code to release the funds. After you pay, there is always another fee. No loan arrives.
The FMA has published warnings of this kind. One alert described letters demanding a fee for the regulator to supposedly obtain documents and approve loan funds, which the FMA called fictitious and typical of advance-fee fraud. Its recent alerts also describe recovery scams that pose as agencies and demand upfront fees, and requests for crypto payments.
Warning signs
- A request to pay before the loan is made, especially by gift card, crypto or a transfer to a personal account
- Being told you are certain to get the loan when the lender has not asked about your income. Nobody can promise approval before looking at your situation
- Pressure to act today
- Contact that started with them: an unsolicited text, email, call or message
- Poor grammar, a free email address, or a website with no verifiable company details
- A lender you cannot find on the Financial Service Providers Register
- Claims of FMA registration that you cannot confirm. The FMA warns about fake claims of New Zealand registration, with fake websites and misleading contact details
2. Fake lenders and impersonation
Scammers copy real companies. They lift logos, names and web designs, or set up a lookalike domain. Sometimes they appear after you fill in a form on a lookalike comparison site.
How to protect yourself:
- Do not use contact details in an unsolicited message. Find the company’s number yourself and call back.
- Check the register. Consumer NZ says you can see which dispute scheme a lender belongs to on the Financial Service Providers Register at companies.govt.nz. A real lender can name its scheme in your disclosure statement.
- Search the FMA warnings list for the name and website.
- Be wary of “recovery” offers that appear after you have lost money.
About Fair Finance
Fair Finance is a referral service, not a lender. We do not take payment from you to arrange a loan, and we do not ask for card numbers, gift cards or crypto. The lender pays us only when a loan settles, and that does not change your rate. If someone using our name asks you for money, do not pay. See our disclosure page for how we work.
3. Car-buying scams
Not every scam is about the loan. Some are about the car.
- A seller who wants a deposit before you see the car, often with a story about being overseas or a courier who will deliver it.
- A car that does not exist, using stolen photos and a price that is too good.
- A car with money owing on it. If a lender holds security, you could lose the car or be unable to register it. A PPSR check shows registered interests. Consumer Protection explains that a lender usually registers an interest in the vehicle, which is why you cannot sell it until the loan is paid.
- Odometer or history problems. Cheap checks before you commit are worth far more than the cost.
For the private-sale route, read finance a car from a private seller. Consumer Protection notes that if you buy privately with a personal loan you may have no remedy against the seller but must still repay the loan, so the checks come first.
4. Predatory lending: when a real lender goes wrong
A real lender can still do the wrong thing. The CCCFA requires lenders to act responsibly, make reasonable inquiries about whether a loan is suitable and affordable, and make proper disclosure. The Commerce Commission has said motor vehicle lenders who deal with vulnerable consumers are a priority, and it has taken court action over affordability checks and disclosure in car finance. We do not name companies here. You can read the Commission’s media releases on its website.
What predatory lending can look like
- No real affordability check. The lender does not ask for bank statements or about your costs and lends to you anyway, even though your budget is clearly stretched.
- Missing or unclear disclosure. You were not given the interest rate and fees in writing. Consumer Protection says a lender that has not made proper disclosure cannot enforce the contract until it does.
- Fees that look made up. Fees must be reasonable and tied to real costs.
- Add-ons you did not ask for. Insurance or a warranty built into the loan. Consumer Protection says you should check whether “free” extras are built into the loan.
- A repayment you obviously cannot meet, with no mention of the risk.
- Unfair repossession practice. Repossession needs a contract that permits it, a default and written warning. Consumer Protection says you must get at least 15 days’ warning.
- Very high rates. There is generally no cap on car loan rates, except for high-cost loans of 50% or more annual interest, which have extra limits. A high rate is not illegal by itself, but it is a strong prompt to check the total cost and the lender’s duties.
What to do
- Write down what happened, with dates and copies of every document.
- Complain to the lender in writing.
- If it is not fixed, go to its dispute resolution scheme. Consumer NZ lists the Banking Ombudsman, Insurance and Financial Services Ombudsman, Financial Dispute Resolution and Financial Services Complaints. It is free for you.
- Tell the Commerce Commission if you think there has been a breach of the CCCFA or the Fair Trading Act.
- Get free advice. A Community Law Centre gives free initial legal advice, and MoneyTalks on 0800 345 123 is a free financial helpline run by FinCap.
Our car finance complaint page walks through that process. The responsible lending code page explains what lenders are expected to do.
If you have been scammed
The FMA’s steps are clear:
- Stop all contact with the scammer. Do not reply to calls, emails or letters.
- Contact your bank straight away. If you used another bank or a transfer service, contact that too.
- Tell family or friends. Scams are not a reason for shame.
- Report it to the FMA using its report-a-scam form, with names, websites, amounts and screenshots.
- Ring Victim Support on 0800 842 846 for free support.
The FMA says it cannot recover funds, so your bank is the quickest route. The Department of Internal Affairs handles scams by format such as email, text and phone, and text scams can be forwarded to 7726.
An example (illustrative only)
This is a made-up story to show the pattern, not a real person.
A person with a few defaults on file sees a social media post offering “loans for anyone”. They message the page and are asked for their ID and bank login to “check eligibility”. They are told they qualify for $12,000, but need to send $300 for insurance first. After they pay, the page asks for another $450 for “release fees”. At that point, the loan has still not appeared.
The warning signs were all there: the offer for anyone, a request for banking logins, a fee before any contract and a second fee after the first. A genuine lender asks about income and costs, provides a disclosure statement, and does not need your internet banking password. The better move is to stop after the first request, check the register and, if money has already gone, ring the bank at once.
Safer ways to find a car loan
- Compare real lenders. Sorted suggests checking offers from several lenders, including banks and credit unions, and watching establishment and add-on fees.
- Use the soft check. A soft credit check does not affect your credit file in the way a hard check does.
- Understand the cost. Use the repayment calculator and read car finance interest rates explained.
- Know the credit rules. See your rights with a car loan and the cooling-off period.
- If you have bad credit, read bad credit car finance so you know what is normal before you speak to anyone.
How Fair Finance helps
Fair Finance is a referral service, not a lender, a broker or an adviser. One application and one soft credit check go to a panel of approved NZ lenders, and each lender decides case by case. We are paid by the lender only if a loan settles, and that never changes your rate. Start with the quick check if you want to see your options.
Checklist
- I was not asked to pay anything before a contract
- I found the lender’s contact details myself
- The lender is on the Financial Service Providers Register
- I have the disclosure statement and the total cost in writing
- The seller is real and I have seen the car in person
- A PPSR check is done
- I have not shared internet banking logins or passwords with anyone
- I know which dispute scheme to use if things go wrong
General information only, not financial advice or legal advice. Scam patterns change, so check the official pages below.
Sources
Common questions
What is the most common car loan scam in NZ?
The advance-fee scam. Someone offers a loan, often to people who have been turned down elsewhere, then asks for a fee before any money is paid out. The FMA has warned about fake letters demanding a fee for documents or to release loan funds, and describes this as typical advance-fee fraud.
Should I ever pay a fee before my car loan is arranged?
Treat an upfront payment to a stranger as a red flag. Real lender fees are set out in the disclosure statement you get before signing a contract. If someone wants a transfer, gift cards or crypto first, stop and check with your bank.
How do I check a lender is genuine?
Check that it is on the Financial Service Providers Register at companies.govt.nz and which dispute resolution scheme it belongs to. Consumer NZ says lenders must belong to one of four schemes. Search the lender's name on the FMA warnings page too, and never use contact details from an unsolicited message.
What do I do if I have already paid a scammer?
Stop contact and ring your bank straight away, because the FMA cannot recover funds. Then report it to the FMA, and Victim Support offers free support on 0800 842 846. Text scams can be forwarded to 7726.
Is a high-interest car loan a scam?
Not necessarily. A high rate can be legal if the lender follows the rules, including disclosure, affordability checks and fee limits. It becomes a problem if the lender skips those duties. You can complain to a dispute scheme or the Commerce Commission.
Can Fair Finance charge me a fee?
Fair Finance is a referral service. We are paid by the lender only if a loan settles, and that never changes your rate. We never ask you for money to process an application. If anyone claiming to be us asks for a payment, do not pay and tell us.
See your repayments, then get a fair rate.
One application, one soft credit check, no obligation. We match you to the lender most likely to give you a fair go.