The issue of payday loans has returned to the fore. Max Chalmers reports.
Tens of thousands could be eligible to cash in a $ 23 million payment after Cash Converters settles a major class action lawsuit accusing the company of sidestepping payday loan restrictions, a style of loan advocates are used to scam vulnerable people with no other options. .
In his case against law firm Cash Converters, Maurice Blackburn alleged that some clients were required to pay up to 633% interest on short-term loans, despite laws restricting interest rates on payday loans at less than 50%.
The Federal Court this week approved a settlement regarding the action, which the company says will put 35,000 people online who have borrowed from Cash Converters in NSW for part of the payment.
“The money that will be returned to our clients as a result of this case will make an extraordinary difference in their lives and well-being, so it is extremely satisfying to be able to have this positive impact on people,” said Miranda Nagy, special advisor to Maurice Blackburn.
Kat Lane, senior attorney at the Financial Rights Legal Center, said it was common to see payday loans made to people clearly unable to repay them, and only the most desperate consumers turned to interest loans. raised.
She said that as a social worker, it was rare to find clients able to repay loans, indicating that companies do not engage in responsible lending practices and benefit vulnerable people.
“There is so much harm, harm and cost with payday loans that you need special laws to protect people from them,” Lane said.
Despite the fact that the country now has notorious national laws regulating lending, Lane said companies continue to try to find loopholes and ways to get around the regulations.
To end the “regulatory punch”, the Australian Securities and Investments Commission needs more resources to investigate the sector, she said.
A recent report from the Commission discovered that companies were targeting people on Centrelink with extremely expensive “consumer leases”, a financial product that businesses can use to bypass payday loan restrictions.
A spokesperson for Cash Converters said the company was happy to close the dispute without any acknowledgment of liability.
“The settlement avoids further legal costs in the litigation, avoids the application of additional management and employee resources to the case and ends the uncertainty surrounding this case,” they said.
“The loan scheme was only used in New South Wales during the relevant period which ended on June 30, 2013. Since then all Cash Converters loans have been made under the new scheme. Nationally Consolidated Federal Consumer Lending Act established by the National Consumer Credit Protection Act. . “
Unfortunately for the company, she still faces similar action in Queensland, again sued by Maurice Blackburn.
The federal government is currently executing a review of small loans including consumer leases and payday loans, to be presented by year end.
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