Canadian Payday Loan Company Faces Lawsuit
By J.J. CameronPayday Loan Writer
Many payday loan stores on Canada are being hit with lawsuits these days. The latest? Cash Store, Inc., which has seen an Ontario court conditionally certify a class action lawsuit against it.
The class action applies to any resident of Canada, outside British Columbia and Alberta, who got an instant cash loan from a Cash Store and who repaid the loan at the us
ual fee of between 22.5 and 25 per cent of the loan amount.
Rentcash said the certification was conditional on the plaintiffs giving the judge details on how the lawsuit's parties would be notified of the proceeding. In a news release, Rentcash said it would defend itself "vigorously" against the class action.
Rentcash is the only fast payday loan company in Canada that is publicly traded on the TSX. In the most recent quarter, Rentcash reported its revenues from its brokerage operations more than doubled to $31.1 million as the number of its stores also more than doubled to 332.
Payday loan industry is controversial
Across Canada, more than a dozen lawsuits have been filed against a variety of payday loan stores/operators. The suits allege that the fees and interest charges levied for short-term payday loans – often for just a week or two – far exceed the maximum allowed interest rate. The Criminal Code forbids charging interest rates of over 60 per cent per year.
Even though higher rates are illegal, cases are usually settled in civil court because they are difficult to prosecute criminally. Once fees and interest charges are calculated for short-term payday loans, some estimates say the cost for some loans works out to an effective annual interest rate of more than 1,000 per cent.
In January, Instaloans – another Rentcash subsidiary – settled a class action lawsuit on behalf of 6,000 customers for $1.3 million. In 2003, 40 payday loan companies formed The Canadian Payday Loan Association, which has a code of business practices for its members to follow. The association has banned rollover payday loans.
Rentcash was a founding member of the Canadian Payday Loan Association.
