Cash Converters shares are in a trading halt after the payday lender was hit with another class action lawsuit over fresh claims it overcharged borrowers for interest rates and brokerage fees.
The latest class action, led by Maurice Blackburn on behalf of 30,000 Queensland customers and filed in the Federal Court, relates to claims the payday lender was allegedly charging customers interest rates of up to 160% in addition to brokerage fees, which is well above the 48% legal limit lenders are allowed to charge customers on consumer credit contracts.
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It is not the first time the country’s largest payday lender has faced legal action over exorbitant interest rates, with two class action lawsuits levelled against it in 2013.
Nor is it the first time the ASX-listed company has entered a trading halt, with a previous trading halt having been called on June 17 this year as the company sought to finalise the settlement details of one of the two class actions.
The following day, the company reached an in-principle settlement agreement to pay $23 million to 37,500 low-income Cash Converters customers in NSW who claimed they were being exploited by excessive interest rates. That class action was also led by Maurice Blackburn.
Shares in Cash Converters were halted on Thursday, with Cash Converters International company secretary Ralph Groom telling the market the lender was requesting a trading halt in response to media reports about the class action.
“Cash Converters International Limited wishes to enter into a trading halt in response to reports in the media it will today be served with a class action writ issued in the NSW Registry of the Federal Court of Australia,” Groom said in a statement.
The trading halt will be in place until Monday August 3.
In a statement provided to SmartCompany, special counsel at Maurice Blackburn, Miranda Nagy, said the class action, which refers to interest rates charged between 2009 and mid 2013, came about after Queensland borrowers alerted the lawyers to similar practices to those happening in NSW.
Nagy says in 2011, Cash Converters admitted having in place mechanisms to ensure the company received a greater return than the 48% annual cap imposed on them.
She labelled the practice as “deliberate and systematic”.
“It resulted in vulnerable people incurring massive additional fees and interest, in contravention of the very laws that were designed to bring down some of the cost of the credit,” Nagy says.
Nagy says the class action is seeking to recover $30 million in refunds from all brokerage fees paid by the Queensland borrowers during the 2009-13 period.
“The class actions regime gives people an equality of arms through strength in numbers, meaning that big companies can’t just win by attrition, which is something to be grateful for in cases like this,” she says.