More than 37,000 Cash Converters customers who claimed they were charged excessive interest on short-term loans will get refunds after a multi-million dollar class action was settled out of court.
The $23 million in-principle settlement was reached between the pawn broker and about 37,500 of its NSW customers on Thursday.
Lawyers for the customers said settlement was still subject to Federal Court approval, but it signalled a "significant victory" for the customers, many of whom ended up paying up to seven times what they should have in interest on personal loans.
"Our understanding is and our expectation is that all of the group members will receive all of their overcharge plus interest. It's a particularly impressive settlement," Maurice Blackburn principal Ben Slade told reporters.
The class action covers all NSW Cash Converters customers who took out short term loans from July 2010 until consumer lending laws changed in July 2013.
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Maurice Blackburn argued Cash Converters got around state laws capping interest rates by having borrowers sign a document that committed them to repay their loans early, but which also caused interest rates to soar seven-fold on one-month cash advance loans, and more than double on seven-month loans.
Lead plaintiff Julie Gray said she was very happy with the outcome.
"It has been a long and hard road but I just hope this has helped a lot of people," said Ms Gray, a disability pensioner from Cambridge Park in Sydney's west.
She warned prospective borrowers not to use pay day lenders like Cash Converters, saying she got caught in "spiralling debt".
"I would advise them not to do it, it can get very depressing," Ms Gray said.
"There's other avenues you can take that I wasn't aware of ... that's the reason I would never go back."
Maurice Blackburn lawyer Miranda Nagy said Ms Gray had paid $60 a fortnight on a $600 loan instead of $10 a fortnight because she was locked into a seven month repayment period.
Cash Converters said it would pay $20 million into a fund to be distributed to members of the class action, while another $3 million would be used to pay court costs.
"Cash Converters is pleased to bring this litigation to a close without any admission of liability," the company said.
