As the number of class actions relating to credit fees increases, the courts are making decisions as to how they may be structured.
In Cash Converters International Limited v Gray [2014] FCAFC 111 the Federal Court of Australia Full Court has confirmed a decision by Justice Farrell that while the applicant in a representative proceeding (class action) must have a claim against each respondent, each group member is not required to have a claim against each respondent to the proceedings.
Up to 40,000 Cash Converters customers in NSW are claiming about $40 million compensation. The case is expected to be heard in 2015.
The plaintiff (Ms Gray) has issued two proceedings claiming fees charged were void (because they caused the annual interest rate to exceed the permitted maximum annual percentage rate of 48%) or unconscionable.
Personal Loans Action
The Personal Loans Action relates to personal loans made by Safrock Finance Corporation (QLD) Pty Ltd (Safrock) and Cash Converters Personal Finance Pty Ltd (CC Personal Finance). Safrock and CC Personal Finance are subsidiaries of Cash Converters International Pty Ltd (CC International).
Ms Gray brings the Personal Loans Action on her own behalf (in relation to two personal loans made by Safrock and one made by CC Personal Finance) and on behalf of Group Members, being people who entered into one or more credit contracts in New South Wales with either of Safrock or CC Personal Finance between 1 July 2010 and 30 June 2013 and had any of the following fees or charges debited to their account under the contract: (1) the “nAdmin fee”, (2)the “Administration Fee”, or (3) the “deferred establishment fee”.
Cash Advances Action
The Cash Advances Action relates to cash advances made by Cash Converters (Cash Advance) Pty Ltd (CC Cash Advance) and by franchisees of Cash Converters Pty Ltd (CCPL) in New South Wales (NSW Franchisees). CCPL and CC Cash Advance are subsidiaries of CC International. Ja-Ke Holdings is a NSW Franchisee of CCPL and trades as ‘Cash Converters Penrith’. CC International, CCPL and Ja-Ke Holdings are the first, second and third defendants respectively in the Cash Advances Action.
Ja-Ke Holdings made all of the cash advances to Ms Gray (comprising 21 credit contracts entered into between 1 July 2010 and 12 October 2012). Ms Gray also makes claims on behalf of Group Members, being people who entered into credit contracts under which less than $1,000 was advanced by CC Cash Advance or a NSW Franchisee in the period between 1 July 2010 and 30 June 2013 in relation to which the Group Member signed a ‘Cash Advance Early Repayment Election’.
Ms Gray claims that she signed a document entitled “Cash Advance Contract” in relation to each of 21 advances made to her by Ja-Ke Holdings. She claims that the contracts included terms providing for (1) an annual percentage rate of 48%; (2) a loan term of 24 months; and (3) a “deferred establishment fee” which would be payable if Ms Gray paid out the loan before the full term, with the amount of the fee to vary depending on the date on which the loan was fully repaid.
The Full Court decided that:
“Ms Gray and six other persons have a claim against each respondent in each proceeding. Some group members will not have a claim against each respondent.
In the Personal Loan Proceeding, Ms Gray has a claim against each respondent. The proceeding is properly constituted. The fact that there might be (and probably will be) group members with a claim against either Safrock or CC Personal Finance does not alter that conclusion.
The Cash Advances Proceeding is structured differently. The group members are described as including natural persons who had advanced to them $1,000 or less from a lender which was either a franchisee where CCPL was the franchisor or CC Cash Advance…. There are three respondents to the proceeding. CCPL, the franchisor of the Cash Converters franchise in Australia, and CC International, the parent entity of CCPL, are joined on the basis that they were involved in the contraventions by the relevant franchisee and were thereby accessories to its unconscionable conduct. The third respondent, Ja-Ke, advanced the monies to Ms Gray. No other franchisee (or the other named entity, CC Cash Advance) that advanced $1,000 or less to a group member is a respondent to the proceeding.
The fact that the other franchisees and CC Cash Advance (who made cash advances to some group members) are not respondents to the proceeding cannot and does not alter the conclusion that the proceeding is properly constituted …. Ms Gray and six other persons have claims against each respondent.
The nature of the claims made in the proceeding …and the questions common to the group members’ claims … demonstrate why this is an appropriate representative proceeding. The size of each claim is small and the answers to the common questions will determine a large number of those small claims.”
