Cash Converters will cough up A$17 million – or three quarters of its 2018 net profit – to resolve one component of a class action being heard in the Federal Court of Australia.
In a settlement on the courthouse steps yesterday morning, the short-term lender agreed with the plaintiff lawyers on a partial settlement.
The funds will pay legal bills and compensate “cash advance customers alleged to have paid more than 600 per cent interest on their loans”, as lawyers Maurice Blackburn summarised a claim brought on behalf of nearly 30,000 Queensland borrowers.
This cohort, lawyer Miranda Nagy said in a statement, “took out one-month loans on which a brokerage fee was charged which caused the effective interest rate to exceed 600 per cent per annum. “
The settlement is without admission of liability by Cash Converters.
Proceeding on the rest of the class action are underway before Justice Jacqueline Gleeson.
This second matter will resolve claims “that Cash Converters brokerage fees on personal loans breached Queensland credit laws by effectively charging borrowers interest rates of more than 175 per cent per annum.”
Cash Converters told the ASX that this claim “is being vigorously defended.”
In its statement, it explained that the partial settlement “avoids the further application of further executive and employee resources.”
The financier is short-handed in the C-suite. Mark Reid, the chief executive hired in late 2015 left the company on 28 August, the day it reported its full year profit.
In 2015, Cash Converters settled two class actions over similar breaches in NSW, at a cost of around $23 million.