A Calgary law firm is under investigation for allegedly arranging high-interest loans for residential school survivors who were waiting for compensation payments.

A Calgary law firm representing thousands of residential school abuse claimants is facing allegations of arranging improper loans to its clients. (Library and Archives Canada/PA-042133) An independent court observer appointed for the Indian Residential Schools Settlement agreement is investigating allegations that Blott and Company, which represents about 3,000 claimants, arranged loans for some clients at interest rates approaching 30 per cent.

In the end, some claimants were allegedly left with tiny fractions of their government settlements.

Such loans were specifically forbidden under the terms of the $1.9-billion federal residential school abuse settlement process.

Lawyers for Blott and Company told CBC News that the firm has not been found guilty of any wrongdoing.

While Chief George Stanley of the Alberta Assembly of First Nations is calling for a criminal investigation, a court has allowed the firm to continue to represent other residential school claimants.

“I believe they should be suspended until further notice until there is a thorough investigation,” he said.

Daniel Ish, the chief adjudicator for the residential school settlement proceedings, acknowledged there have been problems.

“There is some errant activity, but we are kind of the eyes and ears, and we don't let it pass by unattended,” said Ish.

Federal Aboriginal Affairs Minister John Duncan said that overall, the settlement process has been a success.

“When you look at what a monumental task this has been, it’s been fairly seamless,” he said.