British Columbia's consumer watchdog has announced that a major Canadian payday lender will have to refund millions of dollars that were ruled to have been illegally charged to its customers between Nov. 1, 2009 and October 2010.
Consumer Protection BC has found that the operator of The Cash Store and Instaloans violated provincial law starting in 2009 by overcharging customers for payday loans by requiring customers to also pay for cash cards.
By law, the maximum lending rate in B.C. is $23 on $100, but customer were sometimes charged anywhere from $7 to $21 above that per loan, Consumer Protection BC has found.
Manjit Bains, the vice-president of corporate relations for Consumer Protection BC, said that Cash Store Financial Inc. violated the law that caps the money lending rate at 23 per cent.
"Payday loan consumers cannot be charged extra for cash cards, that is the law," Bains said.
"This decision sends a clear message to the industry and to consumers that consumers must never have to pay more than $23 for every $100 borrowed."
Millions in refunds
Bains did not know how many people will be affected by the decision, but said the total repayments could potentially be in the millions.
Bains said that more than 700,000 payday loans are issued to about 130,000 British Columbians every year, with a typical borrower taking out five or six loans.
Cash Store Financial Inc. now has 90 days to repay customers who were overcharged, and will have up to 120 days to provide an accounting of those repayments to Consumer Protection BC.
Cash Store Financial Inc. will also be required to pay a $25,000 administrative penalty and just over $21,000 in other costs incurred by the investigation and judgement.
Consumer Protection BC originally issued this decision as a compliance order to Cash Store in November 2010.
The lender requested a reconsideration of the decision, which was granted. But on Friday, Consumer Protection BC re-confirmed the key elements of the original decision — that The Cash Store and Instaloans needed to stop charging the extra fees and needed to refund customers who were overcharged.
Consumer Protection BC said that Cash Store has since been in compliance and now provides a no-fee no-card option to receive payday loans.
Payday loans are short-term loans of under $1,500 that must be repaid within 62 days. The loans are sought out for a variety of reasons, including covering unforeseen emergencies and paying bills between paycheques, Consumer Protection BC said.