Nova Scotia Registrar of Credit Alleges Overbilling; Files Charges Against Payday Loan Store
By Paul RizzoPayday Loan Writer
The Canadian payday loan industry just keeps getting more and more turbulent. The Nova Scotia Registrar of Credit has ruled that Cash Store appears to have violated the Criminal Code by charging more than 60 percent annual interest, the bureau reported after wrapping up a six-month investigation.
The investigation resulted from a November 2005 complaint filed by William McFadden about a particular Cash Store location in Amherst, Nova Scotia. The Registrar determined that Cash Store charged borrowers a default fee (deemed an administration charge), but did not deduct the fee from the amount owed when the payday advance loan was paid on time or early.
In a March 28 letter to the company that was never made public, Registrar officials state that when all fees were calculated, the rate of interest charged to McFadden was 395.18 percent, in violation of the Criminal Code. McFadden is but one of many victims of this alleged quick cash advance over-charging.
Two other stores in metro Halifax were also investigated, and the findings were more than 1,400 instances of excess fees charged on payday loans, even though the loans were paid on time. Officials allege that Cash Store has repeatedly violated legislation, and ordered that all 12 stores in Nova Scotia suspend operations for two weeks beginning May 1, but all of the stores have remained open so far.
The Registrar ordered the company to refund all borrowers who paid more than the amount that was disclosed on the payday loan agreement, including the processing fee, a $10 debit card fee, and any other payment of interest if the no faxing payday loan was paid in full before the its date. The 1,400 defrauded citizens would then be refunded approximately $700 each.
Cash Store has appealed the decision, claiming it is too harsh. A company executive estimated the amount of the refunded fees would be more than $1,000,000, and the company claims that if it abides by all the terms in the decision, it will be forced into bankruptcy, causing the loss of 47 jobs.
This is not the first time a faxless payday loan firm has been accused of such billing impropriety by customers. The maximum payday APR is supposed to be 59 percent, yet critics assert that when one adds on certain fees, which they argue should count as interest, the effective interest rate can be as high as 800 percent.
