Payday Loan Industry May Face Lawsuit

Article excerpt

Woman claims firms skirting regulations

A Winnipeg woman has initiated a class-action suit against the payday loan industry, alleging two local operators are charging more than the law allows.

The woman named The Cash Store and Instaloans in a suit recently filed at Court of Queen's Bench, alleging they are charging more in interest than the province permits under new rules introduced in 2010.

The suit alleges the firms are violating the Manitoba Consumer Protection Act and PayDay Loans Act and regulations, inflating the cost of borrowing by forcing customers to buy cash or debit cards to access their loans through an ATM operator.

The allegations have not been proven in court and the court action has not been accepted yet as a class-action lawsuit. Statements of defence have not been filed.

Manitoba brought in regulations in October 2010 that limit the cost of credit for payday loans to 17 per cent of the principal advanced. The suit alleges the payday firms changed their practices to evade the regulations so they could charge customers higher fees.

"The Cash Store has been using these cash card fees to evade (provincial) regulations which limit them to 17 per cent," Vancouver lawyer Paul Bennett said.

The suit alleges Cash Store and Instaloans, with the addition of extra fees, is imposing loan costs of 23 per cent, in violation of Manitoba law.

Bennett said when the extra fees are added in, the cost of the loan is the equivalent of 50 per cent of the principal.

Other firms named in the suit are: Loansalberta Inc., Assistive Financial Corp., and DirectCash Payments Inc.

The class action is asking the courts to order the firms to repay the Winnipeg woman and others in the suit for the borrowing costs they incurred in taking out the payday loans and for the court to award unspecified damages for the firms participating in a conspiracy to overcharge its customers.

If the court approves the class action, anyone in Manitoba who borrowed money from the payday firms will automatically be included in the suit and entitled to a portion of a settlement. …