Cash Converters set to face additional Queensland action on loans

28 April 2016
Australia’s biggest payday lender Cash Converters is at the centre of a new Queensland class action over fresh claims it imposed charges exceeding the legal limits upon tens of thousands of financially struggling Queensland borrowers.

The new case, filed in the Federal Court this week, follows the $23 million settlement Maurice Blackburn secured against Cash Converters last year in relation to similar NSW loans, and is in addition to the credit loans case filed for Queensland borrowers last year.

Miranda Nagy, Special Counsel at Australia’s leading class action law firm Maurice Blackburn Lawyers, says that despite laws in Queensland capping interest rates at 48 per cent per annum on consumer credit contracts, Cash Converters employed a business model that charged borrowers hefty brokerage fees and sent the actual interest rate skyrocketing to 420 per cent per annum.

Ms Nagy says that from 2009 to mid-2013, Queenslanders were required to appoint a broker and pay a substantial fee in order to access “cash advance” loans from Cash Converters lenders – despite the fact that Cash Converters offered loans in other states in Australia without charging brokerage fees.

“The fees amounted to over a third of the principal sought, or $35 on a $100 loan.  Our calculations indicate that for Cash Advances the effective interest rate was upwards of 420 per cent per annum,” Ms Nagy said.

Maurice Blackburn will allege that when lending laws in Queensland changed in mid-2008, Cash Converters contrived to avoid the interest rate cap, introducing brokerage fees immediately after Queensland regulators rejected Cash Converters’ initial attempt to avoid the new laws by seeking to channel all consumer lending through their pawn-broking business.

“The practice was deliberate and systemic. It resulted in vulnerable people incurring massive additional fees and interest, in contravention of the very laws that were designed to bring down the cost of credit,” Ms Nagy said.

“Short-term loans are meant to be just that, short-term. But the reality is that excessive fees and interest can force borrowers to borrow again and again, and their debt can easily spiral out of control.”

Ms Nagy says that in 2011 before a Federal Parliamentary committee, Cash Converters admitted to having in place mechanisms to ensure they receive a greater return than the 48 per cent annualised cap imposed on them.

The class action seeks to obtain refunds of around $17 million on all brokerage fees paid by an estimated 23,000 Queensland borrowers in the period from 30 July 2009 until 30 June 2013.

Gold Coast resident, carer and disability pensioner Kim McKenzie will lead the new class action on behalf of other affected borrowers. 

“When you’re having to rely on these loans just to afford everyday items such as groceries, medicine or simply to ensure you have a running vehicle, the last thing you need is a financial debt trap being set,” Ms McKenzie said.

“Loans like this should be designed as a short term solution to help get you out of trouble, not set up in such a way that they almost ensure you’re stuck in more trouble for longer.”

Ms Nagy said there is no way individuals like Kim McKenzie  could take on a well-resourced, ASX-listed company like Cash Converters on their own, but they can stand up to corporate wrongdoing like this through an effective class actions regime.

“It’s an important safety net. The class actions regime gives people an equality of arms through strength in numbers, meaning that big companies can’t just win by attrition, which is something to be grateful for in cases like this,” Ms Nagy said.

People wanting more information or wanting to register their details can do so at

The case in brief:

Under Queensland law from 31 July 2008 up until 30 June 2013, the maximum annual interest rate that could be charged on credit contracts, including all fees and charges, was 48 per cent. This case argues that people such as lead applicant Kim McKenzie were required to appoint a broker (that was a Cash Converters franchisee or related company) in order to access Cash Converters personal loans, which added an additional fee of 35 per cent of the loan amount.

The case will argue that this was a mechanism the payday lender used in order to charge more than the legal limit of 48 per cent interest and that the brokerage fee was required to be included in the interest calculation, which resulted in the company charging an effective annual interest rate of around 160 per cent, well in excess of the legal limits at the time.  The case will also argue that the charging of brokerage was unconscionable because the service provided by the broker was illusory.

The respondents are:

  • Cash Converters International Limited, which is listed on the ASX;
  • Three wholly owned subsidiaries of Cash Converters International Limited which engaged in lending on Cash Advances, namely Cash Converters Stores Pty Ltd (‘CC Stores’), Cash Converters (Cash Advance) Pty Ltd (‘CC Cash Advance’) and Bak Pty Ltd (‘Bak’).