Micro-lender Cash Converters (ASX: CCV) faces a potential class action claiming damages of $40 million. Legal firm Maurice Blackburn estimates that up to 45,000 customers may be affected and Cash Converters knowingly misled people as to the true costs of the loans. It is alleged the loans involved were in direct breach of the Credit (Commonwealth Powers) Act 2010 (NSW), which applied between 1 July 2010 and 30 June 2013.
The disputed loans are ‘Cash Advances’ (typically less than $1,000 and repaid within one month) and ‘Personal Loans’ (typically $500 – $2,000 and repaid within seven months). The proposed action only applies to loans generated in NSW, where terms such as ‘deferred establishment fees’, ‘administration fees’ or ‘nAdmin fees’ were referenced.
In the statement regarding the action, Maurice Blackburn says: “It is possible that Cash Converters may claim that they were justified by the customer signing a document called an ‘Early Repayment Election’ at the time of entering into ‘Cash Advance’ or ‘Personal Loan’ contracts. Regardless, Ms Gray claims that those fees should have been included in the calculation of the interest rate. Instead of 48 per cent per annum, those fees meant that the effective interest rate on a typical ‘Cash Advance’ was about 633 per cent and on a typical ‘Personal Loan’ was about 145 per cent, and accordingly, the fees should not have been charged”. As is common in class actions, Ms Gray is the representative plaintiff.
Any affected customers can contact Maurice Blackburn.
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Motley Fool contributor Peter Andersen doesn’t own shares in Cash Converters.