A Calgary lawyer has launched a class-action lawsuit against a payday loan company, alleging that the industry gives loans with interest rates and fees that equate to 15,000 per cent a year.

Bill McNally filed the lawsuit accusing the Alberta company of disguising interest rates so people don't realize how much they're actually paying for short-term loans.

"These companies really exploit people who are vulnerable, who don't have the necessary economic capacity to pay their bills on an ongoing basis and are therefore at the mercy of very exploitive lending practices," McNally said.

The lead plaintiff in the suit, Jacob Ayrton, said he could never get a loan from his bank when he was short on cash, so he borrowed $500 from a payday loan store.

He paid it back two weeks later – along with $11 in interest and $95 in brokerage fees.

The company said it makes customers fully aware of what they'll have to pay.

Under the Criminal Code, companies can charge an annual interest rate of up to 60 per cent.

But McNally said the total that Ayrton paid would add up to more than 15,000 per cent per annum.

Elsewhere in Canada, there are about a dozen lawsuits filed against other payday loan operations.

"The companies are not completely up-front about the rates they charge," said John Lawford of the Public Interest Advocacy Centre in Ottawa.

There are no regulations governing the industry, but Lawford's group is lobbying the federal government to change that.

"It's an industry that has shown it's been abusive in the past," Lawford said.

"There are problems with overzealous collection, there are problems with lending multiple times to clients who can't afford it, and that's irresponsible lending."

Last year, 40 payday loan companies formed an association to offer customer protection and drew up a code of business practices for members to follow.

But that's not mandatory and the organization admits there are problems.

"There are approximately 250 stores operating in Canada outside the code," said Bob Whitelaw of the Canadian Association of Community Financial Service Providers.

"And, of course, business decisions that they make outside the code reflect on the industry as a whole."

Industry Canada is holding hearings in June on whether to regulate the payday loan industry, and if so, how to do it.

In the meantime, McNally said he's hoping to get some money back for thousands of customers in Alberta, as well as punitive damages from the company.