Day one of the class action trial alleging payday lending giant Cash Converters acted unconscionably and unlawfully in imposing astronomical interest rates on short term loans on Queensland borrowers, has begun with Cash Converters agreeing to a $16.4 million settlement of one part of the claim.
In a significant win for victims, the trial started with counsel for the victims, John Sheahan QC, informing Federal Court Judge Justice Gleeson that part of the trial need not proceed due to the successful outcome for cash advance customers alleged to have paid more than 600 per cent interest on their loans.
The cash advances claim was brought on behalf of nearly 30,000 Queensland Cash Converters borrowers who took out one-month loans on which a brokerage fee was charged which caused the effective interest rate to exceed 600 per cent per annum. The settlement is without admission of liability by Cash Converters.
Running the case for victims is Principal Lawyer at Maurice Blackburn Miranda Nagy, who also ran two class actions against Cash Converters for similar breaches in NSW, successfully settling those class actions in 2015 for $23 million.
“This class action is a perfect example of how the class action regime works to promote access to justice for the most disadvantaged in our community,” Ms Nagy said.
“This is a large group of people, who borrowed very small amounts of money, for very short periods, at high interest rates. None of them could hope to have run this case to see justice served, without an effective class actions regime.
“We are really pleased with this result, but are focused on winning the rest of our case and obtaining justice for an even bigger group of people who took out Cash Converters’ Personal Loans.”
The brokerage fee is central to the remaining claim that Cash Converters brokerage fees on Personal Loans breached Queensland credit laws by effectively charging borrowers interest rates of more than 175 per cent per annum. Personal Loans were significantly larger than cash advance loans, with sums of between $600 and $2,000 borrowed for a loan term of six months.
Consumer laws in Queensland that commenced in 2008 capped the maximum interest chargeable at 48 per cent per annum, inclusive of credit fees and charges under the credit contract. The case to be put on behalf of Queensland borrowers is that the “brokerage” fee, implemented by Cash Converters to coincide with those laws, was merely a mechanism to avoid their effect, and to ensure Cash Converters obtained a greater return than the laws permitted, and was unlawful or unconscionable.
“Class actions such as this give a voice to the voiceless, they help enforce lending laws which are intended to protect consumers and they help everyday people hold big business to account,” Ms Nagy said.
The trial before Justice Gleeson in the Federal Court, Sydney Law Courts, 18D, continues and is scheduled to run for three weeks. The nation’s leading class action experts Maurice Blackburn Lawyers will run the case on behalf of victims.