As many as 100,000 Ontarians who have paid exorbitant fees and interest on their payday loans are eligible for at least $ 50 as part of their part of a $ 10 million lawsuit settlement.
London law firm Harrison Pensa LLP filed a class action lawsuit against Cash Store Financial because those stores were charging excessive fees and interest.
The company had nine Cash Store and Instaloans outlets in London and one in Sarnia.
“There is a fairly large customer base in southwestern Ontario,” said Jon Foreman, partner at Harrsion Pensa.
The two loan companies filed for insolvency after the class action was launched – the creditors including bondholders who collectively owed $ 120 million – so the process of securing the $ 10 million settlement was complicated. “There were creditors everywhere,” Foreman said.
Someone who has had multiple loans is likely to receive more than $ 50, but the amount each person pays will also depend on the number of people who share the total pot.
The settlement means that there is no admission of wrongdoing.
But the lawsuit alleged the companies scammed customers by charging high fees on loans and then charging up to 21% interest on the total loan and fees – in violation of cost of borrowing regulations imposed by Ontario in 2011.
The company had a different business model and structure than most payday lenders, Foreman said. This included ties to third-party lenders and the offering of “lines of credit” that the courts have subsequently ruled to be payday loans in anything but name.
It would, for example, sell a customer a debit card and bank-type account for $ 9, plus a monthly service charge of $ 9, plus $ 2.50 per transaction. And he was charging fees for all the loans on those accounts, as well as interest on those loans at additional fees.
The class action lawsuit was launched in 2012 on behalf of a client who borrowed $ 400 for nine days.
He had to pay $ 68.60 in fees and service charges and $ 78.72 in interest for a total cost of borrowing of $ 147.32, meaning that a loan of $ 400 became a debt of 547. , $ 32 just over a week later.
Payday companies have been criticized by the public and lawmakers who say customers, many of whom have fixed incomes and are already struggling financially, have to pay high rates and fees that make it even more difficult for them to acquire a solid financial base.
“A ton of their income goes to pay their fees and interest, which is unsustainable,” Foreman said.
Advocates of payday loans claim that the money is only intended to bridge the cash flow between paychecks and that the arrangement is important for people who would not qualify for loans from conventional sources.
This is why the business is regulated by the province, with stricter rules starting in September 2011, the start date for those covered by this regulation.
Foreman said claimants don’t necessarily need to have kept their documents to be eligible for their share of the settlement. The law firm holds the records of approximately 100,000 Ontario clients, who only need to apply through the TakeBackYourCash.com website.
Foreman said a claims administrator has also been sending letters, texts, phone calls and emails to people who have borrowed from Cash Store and Instaloans since September 2011.
The deal was made last November, but it took several months to assemble the customer database and set up the secure website, Foreman said.
The Payday Loans Association of Canada says its approximately 1,000 branches provide short-term loan or check-cashing services to two million Canadians each year.
For more information
- On how former Cash Store and Instaloans customers can get part of the settlement: TakeBackYourCash.com and file an application by October 31. The money would be available for applicants around mid-2017.
- To understand your legal rights when dealing with payday loan companies: www.ontario.ca/page/prêt-sur-paye-vos-droits