Woes of payday loan company Cash Store worsen as Ontario aims to end its license

The publicly traded company that provides short-term cash advances, largely to people who cannot get them from traditional banks, is now embroiled in a license fight with the corporate protection branch. Ontario government consumers

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For The Cash Store Financial Services Inc., handing out cash doesn’t make them as popular as you might think.

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The publicly traded company that provides short-term cash advances mainly to people who cannot get them from traditional banks is now embroiled in a struggle for its license to operate with the consumer protection department of the United States. Government of Ontario.

The dusting follows other problems for the Edmonton payday loan company. Last year, the company had to restate its financial results for two quarters and was hit by a proposed class action lawsuit in four provinces that seeks repayment of money paid by consumers in addition to the loan principal.

Now, the Ontario Payday Loans Registrar has issued a proposal to revoke the licenses of cash stores in the province. The Edmonton-based company said it has requested a hearing to challenge the Ontario government’s decision.

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In a statement released Tuesday evening, the Cash Store announced that it recently introduced line of credit products in Ontario, which will remove the company and related company Instaloans Inc. from the payday lending business in the province. Therefore, “the Registrar’s proposal to revoke corporate payday lending licenses should not disrupt the current operations of the corporations.”

However, in a press release last week, the Cash Store said it intended to maintain its payday loan license in Ontario “at least until the success of the new product offering runs out. materializes as society anticipates “.

Since September 2011, the Department of Consumer Affairs’ Consumer Protection Branch has demanded that Cash Store offer payday loans in cash rather than electronically, fearing that debit cards could make already expensive loans more expensive. But Cash Store retorts that electronic distribution is “much safer and more efficient” and says it “doesn’t want to put employees and customers at risk of physical harm.”

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The company said the ministry was also trying to ban Cash Store Inc. and Instaloans Inc. from selling products other than payday loans, “onerous restrictions” that the Cash Store says it is ” not ready to accept “.

The Cash Store Financial, which operates 512 branches in Canada and 25 branches in the UK, and is listed in Toronto and New York, also offers debit cards and private label bank accounts.

In October, the firm was hit by a proposed class action lawsuit in four Canadian provinces. The lawsuit, which has not been certified and whose claims have not been proven, alleges that the payday loans provided by Cash Store did not comply with applicable laws governing payday lenders in Ontario, Saskatchewan, Alberta and in British Columbia. The Cash Store has announced its intention to defend itself “vigorously”.

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Meanwhile, the Moody’s Investors Service rating agency revised the Cash Store’s ratings this month, citing financial restatements from 2012 and an investigation by an independent accounting firm retained by the board of directors.

The company’s stock price fell from around $ 6 on the Toronto Stock Exchange in August to $ 3.59 on Wednesday, from around 10% that day, as the company announced its latest row. and its first quarter financial results.

As lending volume and lending costs both increased during the quarter, the Cash Store recorded a net loss of $ 1.7 million for the period ended December 31, down from net income of $ 989,000 for the corresponding period of the previous year. The board of directors decided not to pay a dividend, as it had done in the fourth quarter.

The cabinet’s annual meeting will be held in Edmonton on Thursday.

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In-depth reporting on The Logic’s innovation economy, presented in partnership with the Financial Post.

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About John McTaggart

John McTaggart

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