Money Mart's rates 'criminal,' borrowers' lawyer tells court

Money Mart charged "criminal" interest rates on 4.5 million payday loans over 10 years, a lawyer representing 264,000 borrowers told a judge during the first day of a class-action suit against the lending company.

The Toronto Star
April 28, 2009

Money Mart's rates 'criminal,' borrowers' lawyer tells court
Class-action lawsuit in Ontario seeks 'justice' for 264,000 customers
Betsy Powell

Money Mart charged "criminal" interest rates on 4.5 million payday loans over 10 years, a lawyer representing 264,000 borrowers told a judge during the first day of a class-action suit against the lending company.

"We say this action delivers access to justice for these 264,000 people who are having their day in court before you," Windsor lawyer Harvey Strosberg told Superior Court Justice Nancy Spies in front of a phalanx of lawyers representing plaintiffs and defendants. The class-action suit represents only Money Mart customers in Ontario.

Spies is scheduled to hear arguments over the next six weeks on whether the money charged on those loans, when combined and calculated as interest, breached section 347 of the Criminal Code, which sets the maximum at 60 per cent interest per annum.

The "pivotal issue we're dealing with is illegality," Strosberg said.

The class action asserts that all of the interest and fees charged and collected by Money Mart and its franchisees on "Fast Cash Advance" loans, repaid by cheque on the borrower's next payday, are legally interest even though Money Mart calls them "fees." Money Mart denies the claim and is defending itself in court.

"It doesn't matter what you call it … just because you call a cat a dog it doesn't mean your cat is a dog," Strosberg said.

The suit alleges that on average, each borrower paid $850 in costs associated with the payday loan, money it's asking be paid back.

The case, launched in 2003, has a "tortured history," involving several unsuccessful attempts by the company to have the action dismissed, Strosberg explained.

An in-depth Toronto Star investigation in 2004 exposed how low-income earners get trapped in a spiral of easy loans from payday lenders that they are unable to repay.

The federal government amended section 347 in 2007 allowing provinces and territories to regulate the payday loan industry and place limits on the cost of borrowing.

Last month, Ontario established a maximum rate of $21 per $100, but Strosberg said yesterday that's irrelevant since all the transactions in this case took place before the law was changed and it's not retroactive.

This suit names National Money Mart Company, based in Victoria, B.C., franchisees and U.S. parent company Dollar Financial Group Inc.

Money Mart issued a press release yesterday.

"We believe in the merits of our business practices and in the quality of our products and services," the statement said. "That is why, for the past five and a half years, we have vigorously defended every allegation made in this action and why we intend to continue to do so throughout this trial."

http://www.thestar.com/article/625398


Brought to you by WikidFranchise.org

Risks: Class-action lawsuits: lawyers take majority of risks (& spoils), Criminal interest rates, Lawsuit that would crush whole sector, Lawsuits, class-action, Usury, Canada, 20090428 Money Marts

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License