Payday loan companies agree to $5M settlement

Companies that offer high-interest paycheque advances have agreed to pay $5-million to customers who launched a class action lawsuit.

The settlement has yet to be approved by a judge.

Newfoundland and Labrador doesn't regulate payday loan businesses but companies operating in the province said they will now abide by the regulatory regime in Nova Scotia.

"I am pleased that the defendants have agreed to abide by the Nova Scotia regulatory regime on a voluntary basis," said St. John's class action lawyer Ches Crosbie. "Newfoundland still has no regulation of payday loan practices."

The representative plaintiff in the Newfoundland lawsuit is William Squires of St. John's, a retired journalist.

If the settlement is approved, a portion of the payout will go to 7,300 people in Newfoundland and Labrador who joined the lawsuit against companies such as Money Mart.

The total number of class members inthe suitis 31,000.

The settlement covers customers in Newfoundland and Labrador, Nova Scotia and New Brunswick from January 1997 to March 31, 2010, who entered into a fast cash advance loan with the defendants, a loan which was repaid using a personal cheque.

The lawsuit alleges that companies violated the Criminal Code by charging excessive interest.

The settlement will be paid out in the form of debt forgiveness, credits to customers for future business, and cash.

The settlement must be approved by courts in Newfoundland and Labrador, Nova Scotia and New Brunswick in a joint hearing. The hearing date is set for May 26.

Three law firms representing the plaintiffs will seek approval of fees, services tax and disbursements, totaling $600,000. The firms are Ches Crosbie Barristers of St. John's, Wagners of Halifax, Nova Scotia, and Crocco Hunter of Woodstock, New Brunswick.