Class action seeks data on individuals that got Cash Converters loans
Class Actions July 13, 2018 12:44 pm By Cat Fredenburgh | Melbourne

Cash Converters has been asked to produce data on individuals that it provided payday loans to in Queensland in a class action alleging it charged a brokerage fee to borrowers for services they never received.

The applicants are seeking data on individuals that took out personal loans in Cash Converters’ stores in Queensland or online between July 30, 2009 and June 30, 2013, including the date of the loan, loan transaction ID, loan amount, the borrower’s income and employer, whether the borrower was recorded as receiving a government benefit, and whether the borrower had any dependents.

An interlocutory hearing on the request has been scheduled for July 25.

Earlier this month, Justice Jacqueline Gleeson ordered Cash Converters to provide answers to how it treated its brokerage fees for tax purposes, in the wake of new class action allegations that the brokerage fees it charged individuals who took out pay day loans were actually for services it received.

Judge Gleeson ordered the pay day lender to answer the interrogatories related to its brokerage fees, after documents discovered by the applicants showed Cash Converters may have classified its brokerage fees as fees it paid to the broker for services it received.

The judge said the interrogatories related to Cash Converters’ tax treatment of the brokerage fees were central to the allegation raised in a second further amended statements of claim that the broker fees were for services it received, and not the individuals that took out the loans.

“I recognise that addressing the interrogatories will impose a considerable burden on Cash Converters and that the applicants could have made their applications earlier. However, the new issue is integral to the central issue of whether Cash Converters contravened the law by the imposition of the brokerage fee,” Judge Gleeson said.

Cash Converters estimated the interrogatories would take approximately 90 days to answer and that it would cost it about $150,000 to hire an external accounting firm to assist with the request. Judge Gleeson restricted the interrogatories to 11, but acknowledged this would not greatly reduce Cash Converters’ burden.

The class action alleges Cash Converters charged individuals that took out loans a brokerage fee for services they never received.

Lead applicant Sean Lynch says he was forced to sign an “appointment of broker” form each time he took out a $600 personal loan, which put him on the hook for a $210 brokerage fee. The loan contract he signed covered the $600 loan plus the $210 broker fee.

The class action alleges the brokerage fee should be considered a fee or charge under the credit contract and therefore should be included to calculate the interest rate, which, under Queensland law at the time, was set at 48 percent.

The lawsuit says that if the brokerage fee is considered a fee or charge under the credit contract, the effective annual percentage rate of the loan was over 160 percent.

The class action also claims the lender engaged in unconscionable conduct under section 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) by charging for the “illusory” brokerage services and for designing a mechanism through the brokerage fees to earn a greater return than the statutory interest rate cap of 48 percent.

The class seeks compensation for group members for the amounts of fees and charges paid on the loan above the 48 percent interest rate cap, plus interest.

Cash Converters is facing two class actions over its brokerage fees.

The applicants in both class actions are represented by Maurice Blackburn. Cash Converters is represented by Herbert Smith Freehills.

The cases are Sean Lynch v Cash Converters Personal Finance Pty Ltd and Kim McKenzie v Cash Converters International Ltd.

The following two tabs change content below.

Cat Fredenburgh

Cat Fredenburgh has been covering legal news for 12 years. She was previously Editor-in-Chief at US legal news publication Law360. She is the Co-Founder of Lawyerly.