Online payday loan borrowers for part of $ 10 million class action lawsuit


Some 100,000 payday loan users who borrowed from the defunct Cash Store or Instaloans branch in Ontario can get their share of a $ 10 million class action settlement.

Ontarians who took out payday loans or lines of credit from either lender after September 1, 2011 are encouraged to file claims to recover some of the illegal fees and interest charged to them.

The class action lawsuit alleged that Cash Store Financial Services Inc., which operated more than 500 outlets at its peak, violated the Payday Loans Act by exceeding the maximum allowable cost of borrowing. In Ontario, payday lenders are not allowed to charge more than $ 21 for every $ 100 borrowed.

“Cash Store tended to design its business model to take advantage of the ambiguity of the law,” said Jon Foreman, a partner at Harrison Pensa LLP, who represented the class members.

The company has circumvented the rules around maximum interest rates by adding additional fees for setting up products such as debit cards or bank accounts, he said.

Borrowers whose applications have been approved will be eligible to receive at least $ 50, but some, including those who have taken out multiple loans, may receive more. The final amounts will depend on the number of claims submitted.

The lawsuit was filed in 2012 on behalf of Timothy Yeoman. He borrowed $ 400 for nine days and was billed $ 68.60 in fees and service charges as well as $ 78.72 in interest, bringing his total cost of borrowing to $ 147.32.

The Ontario government implemented an amendment to the law on September 1, 2011 that sought to avoid any ambiguity in the interpretation of the Payday Loans Act, 2008. The change included the specification of what is included in the “cost of borrowing”.

After the change was passed, the Cash Store unveiled “lines of credit” and ceased offering payday loans just as the province announced plans to revoke its payday loan license. The company allowed that license to expire, arguing that its new products did not fall under the law.

The Ontario Superior Court of Justice sided with the government in 2014, saying the new lines of credit were disguised payday loans. Without a payday loan license, the chain was no longer authorized to grant new loans, effectively bankrupting it.

The company and its directors filed for bankruptcy in 2014, complicating the class action lawsuit. Foreman believes borrowers could have received much more if the company had remained solvent.

“When you have a business like Cash Store that literally declares insolvency once the litigation gets to a more advanced stage, that’s a terrible situation for the case,” he said.

“To grab $ 10 million under the circumstances we had was a victory in itself.”

Cash Store Financial blamed its insolvency on increased government scrutiny and changing regulations, class actions and a dispute with lenders who infused it with the loan money. The company has also faced class actions related to overbilling in British Columbia, Alberta, Saskatchewan, Manitoba and Quebec.

In court documents, he noted that the Canadian payday loan market is worth more than $ 2.5 billion and estimates that about 7 to 10 percent of Canadians use payday loans. Its branches granted 1.3 million loans in 2013.

Harrison Pensa tries to make filing a claim as easy as possible, Foreman said.

He created a website – takebackyourcash.com – for borrowers to complete a simple form. Even missing loan documents may be eligible as the lawsuit forced Cash Store to hand over its loan files.

Representatives will also be texting, emailing and calling borrowers over the next several weeks. The deposit period ends on October 31.

Foreman believes there are other lenders who may be in violation of Ontario’s maximum cost of borrowing regulation.

“It’s the Wild West as an industry in a lot of ways,” he said.

“If you think about the transaction going on here, this is an area with a lot of potential for abuse.”



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