Some 100,000 payday loan users who borrowed from the now-defunct Cash Store or Instaloans branches in Ontario can collect their share of a $10-million class-action settlement.

Ontarians who took out payday loans, or so-called lines of credit from either lender after Sept. 1, 2011 are being asked to file claims to recover some of the illegal fees and interest they were charged.

The class action alleged that Cash Store Financial Services Inc., which operated more than 500 outlets at its peak, broke the Payday Loans Act by exceeding the maximum cost of borrowing allowed. In Ontario, payday lenders are not allowed to charge more than $21 for every $100 borrowed.

“Cash Store had a tendency to design its business model to take advantage of ambiguity in the statute,” said Jon Foreman, partner at Harrison Pensa LLP, which represented class-action members.

The company skirted rules surrounding maximum interest rates by tacking on additional fees for setting up products like debit cards or bank accounts, he said.

Borrowers with approved claims will be eligible to receive at least $50, but some, including those who took out multiple loans, could receive more. The final amounts will depend on how many claims are submitted.

The lawsuit was filed in 2012 on behalf of Timothy Yeoman. He borrowed $400 for nine days and was charged $68.60 in fees and service charges as well as $78.72 in interest, bringing his total borrowing cost to $147.32.

The Ontario government implemented an amendment to the law on Sept. 1, 2011 that was meant to avoid any ambiguity in interpreting the 2008 Payday Loans Act. The change included specifying what is included in the “cost of borrowing.”

After the amendment passed, the Cash Store unveiled “lines of credit” and stopped offering payday loans just as the province announced it planned to revoke its payday lending licence. The company allowed that licence to expire, arguing that its new products fell outside the legislation.

The Ontario Superior Court of Justice sided with the government in 2014 — saying the new lines of credit were payday loans in disguise. Without a payday loan licence, the chain was no longer allowed to make new loans, effectively putting it out of business.

The company and its directors filed for bankruptcy protection in 2014, complicating the class action. Foreman believes borrowers could have received much more if the company had stayed solvent.

“When you have a company like the Cash Store that literally declares insolvency once the litigation gets to a more mature stage, it’s a terrible situation for the case,” he said.

“To scrounge $10 million out of the circumstances that we had was a victory in itself.”

Cash Store Financial blamed its insolvency on increased government scrutiny and changing regulations, the class action lawsuits and a dispute with lenders who infused it with the cash to lend out. The company also faced class actions related to overcharging in British Columbia, Alberta, Saskatchewan, Manitoba and Quebec.

In court documents, it noted that Canada’s payday lending market is worth more than $2.5 billion and estimated about 7 to 10 per cent of Canadians use payday loans. Its branches made 1.3 million loans in 2013.

Harrison Pensa is trying to make it as easy as possible for people to file a claim, Foreman said.

It has set up a website — takebackyourcash.com — for borrowers to fill in a simple form. Even those missing loan documents can qualify because the lawsuit forced Cash Store to hand over its lending records.

Representatives are also sending text messages, emails and calling borrowers in the next few weeks. The period to file ends Oct. 31.

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Foreman believes there are other lenders out there who could be violating Ontario’s maximum cost of borrowing regulations.

“It’s the wild west as an industry in a lot of ways,” he said.

“If you think about the transaction that’s happening here, it’s an area that has strong potential for abuse.”