Maurice Blackburn has launched a second class action against Cash Converters in the Federal Court of Australia relating to customers in Queensland. The first Queensland class action, launched in July 2015, remains active
Similar to the first Queensland class action, Maurice Blackburn refer to laws which operated in Queensland from 31 July 2008 to 30 June 2013 that set a maximum interest rate of 48% per annum. It is alleged CCV violated these laws as a brokerage fee was payable in some cases, which Maurice Blackburn argue should be considered a credit fee or charge under the credit contract.
The new class action refers to a figure of $17m, while the other indicated an estimate of $30m. CCV state that “the action will be vigorously defended.”
The class action has just been launched, so there is no immediate material financial effect on CCV. Further, the figures put forward by Maurice Blackburn are only estimated assertions and any potential financial impact cannot be reliably predicted at this stage.
I also note such actions have the potential to run for years. A prior NSW legal action took around two years to complete.
CCV has enough financial flexibility to manage these matters. The group produces strong free cashflows of an estimated $55m forecast for FY16, as well as holding material cash on the balance sheet of circa $50m at 31 December 2015. CCV also has the ability to raise equity if needed and it is considered would have support of its largest shareholder EZCorp, an American pawn broker/payday lender which has a 30% stake and a AUD347m market capitalisation.
Director - Credit Research, Industrials and Corporates. Will has over 15 years’ experience in credit and fixed income markets, including 6 in London, working at fund managers, banks and government treasury.