Jeff Green | Jun 18, 2009
Back to HomeLegalese - June 18, 2009 Payday Loans Class Action
By William A. Florence, Barrister and Solicitor, Rural Legal Services
For many people who live paycheque to paycheque, utilizing “payday loans” from places like Money Mart is one way to help get over unexpected financial hurdles. A payday loan is for a small amount and is made, without security, on the basis of the borrower providing a post-dated cheque or pre-authorized debit to the lender at the time of the loan for the amount of the debt plus a fee. The fees charged are usually very high and the Ontario government passed new regulations under the Consumer Protection Act requiring payday lenders to provide borrowers with clear and full information about the cost of borrowing. According to a government discussion paper, for a typical payday loan of $300.00 for 14 days, the annualized cost of borrowing could be in excess of 400 per cent.
In 2003, a class action was initiated against Money Mart, alleging that the rate of interest that Money Mart was charging is illegal. If you have taken out payday loans from Money Mart, it may be that you could benefit from this class action. Class actions are lawsuits where many people with a common legal issue join together and participate in one large action. By joining a class action, everyone with the same legal problem does not have to file their own claims, but can simply join an existing one. Therefore, one court case can settle what would otherwise have taken hundreds or thousands of cases. One of the benefits of class actions is that low income individuals are able to pursue litigation to enforce their legal rights, as there are usually no expenses for the members of the “class” because the legal costs are paid out of the judgement or settlement.
In addition to class actions simply being efficient and cost-effective, it is also a benefit to the justice system as a whole, in that people or groups with similar claims get the same result and the Courts are not bogged down with hundreds of cases dealing with the same basic issues. Class actions are normally brought against large corporations, and often involve highly complex legal issues. Due to the level of complexity, class actions can take years to settle.
In the class action against Money Mart, it was alleged that Money Mart had breached section 347 of the Criminal Code of Canada by charging interest and fees which collectively constitute an annual rate in excess of the maximum legal interest rate of 60 per cent per annum. Money Mart’s position was that the effective annual interest rate they charged was 59 per cent, and the other charges were not included in their calculation of the annual interest rate, but were “cheque cashing fees”, “item fees”, or “first party cheque cashing fees”. The trial commenced this spring, but was adjourned when the parties agreed to a settle. The settlement, which still requires final Court approval, includes the following terms: the defendants will pay $27.5 million in cash and provide $43 million in debt forgiveness, as well as $30 million in transaction credits to members of the class.
To benefit from the settlement, you would have to be a member of the certified class, being: “All persons who, in the period August 19, 1997 to September 9, 2007, entered into a Fast Cash Advance and/or a Payday Loan transaction in Ontario, with Money Mart or a franchisee of Money Mart, which was paid by cheque on the borrower's next scheduled payday, being the day on which the borrower was scheduled to receive his or her salary, pension benefit, or any other regularly scheduled payment.” The class may end up being expanded to include later transactions, perhaps right up until the end of this year, but that remains to be determined by the Court.
You do not have to sign up to be a Class Member. Money Mart’s records of its customers and transactions will be used to determine who will be released from debt, and who the transaction credits may be given to. If you believe you are a Class Member, and are wondering if you should pay the debt you currently owe to Money Mart, you should first confirm that you actually are a Class Member before making any decisions. Again, if you are a Class Member, there are no fees that you would have to pay to the lawyers who are running the case.