Media release: Cash Converters sued for breaching its responsible lending obligations
Two Cash Converters franchises are being sued in the Magistrates Court by a Victorian mother who received 83 payday loans over three and a half years–54 of which were loans from Cash Converters outlets in Pakenham and Morwell. The claim alleges neither Cash Converters store fulfilled its legal responsibility to ensure the borrower could repay the loans without suffering substantial hardship, that both stores engaged in unconscionable conduct, and failed to disclose certain fees and charges.
The plaintiff received 44 payday loans from Cash Converters Morwell, repaying a total of $46,146.16, and 10 loans from Cash Converters Pakenham for which she repaid a total of$9,732.15. She paid a grand total of $14,632 in fees. The pleadings allege both stores had seen her bank statements and ought to have known that she had multiple loans on the go, yet they continued to extend new loans without an assessment of her ability to repay them.
‘Payday loans are an extremely expensive product and it’s well documented that repeated use can worsen a borrower’s financial situation. That’s why lenders have a legal obligation to ensure loans aren’t “unsuitable” and that they won’t cause financial hardship?this case alleges both Cash Converters stores failed in this regard,’ said Gerard Brody, CEO of Consumer Action Law Centre.
‘The plaintiff had been to Cash Converters Morwell so many times that she had got to know the staff and discussed shared interests like Home and Away and football. It’s hard to imagine that Cash Converters staff wouldn’t have started to ask questions about why she was in so often,’ said Mr Brody.
This is the second time in the last six months that Cash Converters Morwell has been the subject of a Magistrates Court claim. The first, in April of this year, alleged it gave a Disability Support Pensioner 44 loans in a three year period.
Payday lenders offer short-term loans with rates of around 240 per cent, typically to borrowers on a low income. They often set up direct debits repayments so that they withdraw money from the borrower’s account on their payday or pension day. This means that the lender gets paid before the borrower has had a chance to allocate sufficient money for groceries, rent, medicine and utility bills. It puts borrowers in a perilous position and, sadly, they often go back to the lender for another loan just to meet their living expenses. See our infographic on payday lending here.
Media contact: Dan Simpson, 0413 299 567