Loan firm Cash Converters has been sued by aggrieved customers for purported overcharging of loans and circumvention of relevant laws. If found guilty, it will be forced to pay $17 million to more than 20,000 Queenslanders who have been supposedly overcharged by more than 400 percent on interest.
A class action against the money lender has been filed in the Federal Court, which is believed to have been loading brokerage fee in the loan component and pushing up the interest rate to astronomical levels, reports Courier Mail.
The main plaintiff is a Gold Coast woman pensioner who loaned money from Cash Converters for personal needs. Kim McKenzie represents an estimated 23,000 other borrowers.
McKenzie said she had been “too proud” to ask family for financial help and took a short-term loan, which turned out to be a “terrible decision.”
“I didn’t realise what Cash Converters were doing to structure the loans in such a way that would make repayments so expensive”, she added.
According to Miranda Nagy, lawyers Maurice Blackburn’s special counsel, there is a prima facie case of violating Queensland laws as lending rates are capped at 48 percent.
According to Nagy, between 2009 and 2013, Cash Converters forced Queensland customers to pay a substantial fee to access cash advance loans and pushed the interest rate to 420 percent.
Nagy noted the trap inherent in short-term loans, though called as “short-term.” The reality is that high fee and interest force borrowers to borrow again and again and the debt spins out of control.
Cash Converters, in a statement, said it would ‘vigorously defend’ the claim and said it never levied brokerage fee since 2013.
Meanwhile, a report in The Sydney Morning Herald, speaks about the Cash Converters plan to expand in Australia. It bounced back to profit after making multimillion-dollar losses in 2014. The share price had dropped more than 50 percent as the government proceeded with a review of laws in the payday lending sector.
According to reports, the value of Cash Converters’ online cash loans jumped 62 percent in the six months to December 2015. Within that online personal loans grew $44.6 million with 42 percent surge.
More Australians are turning to the online lenders to get fast cash. Cash Converters managing director Peter Cumins said it would target sustainable profits in Australia with a dominant market share in payday lending.
“Our new strategy is to build on our clear brand and network strengths in Australia where we are the industry leader,” he said.