Cash Converters has been slammed with two separate class-action lawsuits from Maurice Blackburn seeking a collective $40 million in compensation.
The firm claims the company has engaged in illegal activity by exploiting Australians who are financially struggling, “by imposing charges that far exceed the legal interest limits”.
Cash Converters was contacted by SmartCompany this morning, but no reply was received prior to publication.
The suit is timely. The Australian Securities and Investments Commission has been engaged in cracking down on payday lenders which have acted illegally by targeting people who could never possibly repay their loans.
Maurice Blackburn’s New South Wales managing principal Ben Slade said in a statement that although NSW law caps interest rates at 48% on consumer credit, the company is accused of charging “exorbitant interest” as high as 633%.
“Those doing it toughest, living hand to mouth, have been hung out to dry by Cash Converters, so today we will commence two class actions against the company, claiming around $40million in compensation for about 50,000 NSW citizens,” Slade said.
Maurice Blackburn special counsel Miranda Nagy accused the company of having borrowers sign separate documents which committed them to paying loans early.
“Forget the happy pictures in their advertisements of people walking out flush with cash – the reality is that desperate people ended up in a cycle of debt while Cash Converters’ profits continued to increase.”
The claims come while Cash Converters is enjoying recent success. Last month the business announced a 12% increase in full-year profit to $32.9 million.
Meanwhile, ASIC has been cracking down on payday lenders. Over the past several months, ASIC has probed companies for allegedly targeting customers who can’t be expected to pay back their loans.
Last month, lender Cash Store entered administration after an ASIC probe, while in August Fast Access Finance was targeted for allegedly constructing an “elaborate” diamond trading scheme, which the company itself defended.