Gray v Cash Converters [2014] FCA 420: Federal Court Ruling Paves Way for Class Action against Cash Converters
Wednesday 3 September 2014 @ 9.42 a.m. | Legal Research | Trade & Commerce
A Federal Court ruling has paved the way for a class action by 40,000 people against Australia's largest pawn broking service Cash Converters in Gray v Cash Converters [2014] FCA 420.
Background
Two class actions have been filed in the Federal Court on behalf of Cash Converters customers in NSW.
Law firm Maurice Blackburn says the customers were charged illegal levels of interest of up to 633 per cent on personal loans. Cash Converters denies the allegation and has applied to have the case struck out.
The company argued that its fees were legal and that western Sydney pensioner and grandmother Julie Gray - who is leading the class action - is only entitled to act on behalf of some customers, not all NSW customers, as she is doing.
About the Class Action
Ms Gray commenced two representative proceedings against Cash Converters and related companies and franchisees on behalf of herself and on behalf of persons who entered into contracts for personal loans and cash advances with Cash Converters.
The statement of claim in the personal loans action included persons who entered into personal loans with either Safrock Finance Corporation (Qld) Pty Ltd or Cash Converters Personal Finance Pty Ltd, both subsidiaries of Cash Converters International Pty Ltd.
Ms Gray made claims in relation to the fees and charges debited under the contract, as well as the interest rate charged by the lenders, which is alleged to have exceeded the legal cap set in accordance with the Credit (Commonwealth Powers) Act 2010 (Cth).
The full bench of the Federal Court, comprised of Justices Jacobson, Middleton and Gordon, allowed the Cash Converters application for leave to appeal an earlier decision but dismissed it with costs.
Compensation Sought
The customers are seeking about $40 million compensation and their case is expected to be heard in 2015. Between 1 July 2010, and 30 June 2013, the interest rate cap on loans in NSW was 48 per cent.
Comments on the Judgment
Outside court, Maurice Blackburn principal Ben Slade said the ruling was a victory for all class actions in Australia where one person lodges a case on behalf of others, including those who may not have a claim against each defendant.
Mr Slade said:
"Today’s judgment is an important result in the Cash Converters process because it makes it clear that the class action can cover all Cash Converters customers that were subjected to these exorbitant interest rates statewide, rather than limiting it to customers of the one outlet in Penrith … It's a sensible decision, and it reinforces the role of class actions working as an efficient legal remedy for large numbers of people affected by the same mass wrong … This ruling, and this case more broadly, are further examples of how a mature and effectively functioning class actions regime such as ours here in Australia is able to provide people with access to real remedies and real justice in circumstances where they wouldn't otherwise stand a chance."
Bank Fees Class Action
Maurice Blackburn has also issued proceedings in the Federal Court of Australia against the ANZ Bank in September 2010 in the first of a series of bank fee class actions for repayment of fees they have charged their customers over the last six years.
On 5 February 2014, her Honour Justice Michelle Gordon of the Federal Court of Australia handed down judgment in the case of Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35 (5 February 2014), in which she found that late payment fees were unlawful penalties and that customers should be reimbursed the money by which those fees exceeded the true cost to the bank, with no retrospective time limitation on the claims. However her Honour found that other fees, including honour and dishonour and overlimit fees, were not unlawful.
On 12 August 2014, Maurice Blackburn filed the first of several open class actions against a series of banks for charging late fees. These claims were filed against:
- Westpac,
- St.George,
- BankSA,
- Citibank; and
- ANZ.
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Sources:
Federal Court ruling paves way for class action against Cash Converters over personal loans – abc.net.au
Cash Converters class action – mauriceblackburn.com.au
Furthering the reach of class actions: Gray v Cash Converters – claytonutz.com
