Payday lenders face massive lawsuit

"Assuming these brokerage fees are interest, and that's the big question in the lawsuit, the interest on one loan for 14 days was 15,141 per cent," McNally said.

The Toronto Star
April 27, 2005

Payday lenders face massive lawsuit
Case could crush loan firms, lawyer predicts. Alberta judge gives go-ahead for class-action.

CALGARY - A Calgary lawyer says his case against payday loan companies could crush the industry in Canada.

Bill McNally said he has been given the green light to proceed with a class-action lawsuit alleging the companiesw charge criminal interest rates.

"The whole industry will be gone", if he is successful, McNally said.

Justice Sal LoVecchio, in a ruling certified the claim by McNally's client, Jacob Ayrton, as the first class-action suit against the firms in Alberta. Ayrton's lawsuit alleges the firms and their corporate directors charge customers illegal interest rates on short-term loans.

Statements of claim include allegations not proven in a court of law.

In 2003 and last year, Ayrton borrowed money from Payroll Loan and Hornby Loan Broker, which in turn arranged for lenders PRL Financing or Thurlow Capital to provide the cash.

McNally said Monday the case will focus on fees charged to individuals who borrow cash to be paid back when they receive their next paycheque.

In one instance, Ayrton borrowed $500 for a two-week period and was charged weekly interest of 1.13 per cent - or 59 per cent annually. He was also required to pay brokerage fees of $95, bringing his total payment at the end of the two weeks to $606.32.

McNally said an actuarial hired by his firm calculated this annual rate of all the extra money Ayrton paid.

"Assuming these brokerage fees are interest, and that's the big question in the lawsuit, the interest on one loan for 14 days was 15,141 per cent," McNally said. Lenders in Canada are prohibited from charging annual rates above 60 per cent and can face up to five years in prison if convicted.

CANADIAN PRESS


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