Cash Converters faces new Queensland class action

The behaviour of payday lenders continues to come under fire, with the launch yesterday of another class action against Australia's biggest payday lender, the ASX-listed Cash Converters. The case will be run on behalf of lead plaintiff Sean Lynch, a disability pensioner from Queensland, by one of Australia's largest plaintiff law firms, Maurice Blackburn Lawyers.

The class action will seek refunds of all brokerage fees paid by an estimated 30,000 Queensland borrowers from 30 July 2009 until 30 June 2013 - an amount estimated at "up to $30 million".

A statement by Maurice Blackburn outlined the case and noted that, despite laws in Queensland capping interest rates at 48 per cent per annum on consumer credit contracts, Cash Converters charged borrowers in that state additional brokerage fees in order to access the company's personal loans. The law firm said the fee was not charged in other states.

These fees amounted to 35 per cent of the principal sought, or $210 on a $600 loan, pushing the effective interest rate to 160 per cent per annum.

"This case argues that people such as lead applicant Sean Lynch were required to appoint a broker (that was a Cash Converters franchisee or related company) which added an additional fee to the loan amount," Maurice Blackburn said.

"The case will also argue that the charging of brokerage was unconscionable because the service provided by the broker was illusory."

Maurice Blackburn said the case was in response to enquiries from Queensland customers of Cash Converters, after it settled with the payday lender in NSW for $23 million in June over practices that pushed up the effective rate of interest for borrowers in that state.

In the NSW case, the statutory 48 per cent cap on interest was supplemented through the use of alleged forced early repayments, which triggered the imposition of "deferred establishment" fees.

"We will allege that when lending laws in Queensland changed in mid-2008, Cash Converters contrived to avoid the interest rate cap, introducing brokerage fees immediately after Queensland regulators rejected Cash Converters' initial attempt to avoid the new laws by seeking to channel all consumer lending through their pawn-broking business," the class action law firm stated.