CTV WHISTLEBLOWER: Problems develop with payday loan collections
It was close to payday, and single mom Amanda Lewis was running short of money. So, last summer, on a couple of occasions, she borrowed $200 from The Cash Store, a payday loan outlet with several locations across Canada. She says she paid the loans back in full, with interest, as soon as she got her paycheque. She thought that was the end of it.
"If I had money that I was still owing to them I would assume that they would have contacted me. But I know that I went up and paid that, " said Lewis, while speaking to CTV from her home in Nova Scotia. "I haven't heard from them at all."
Several months later, without explanation, her bank account was suddenly empty. Another company, Cutter Recovery Services, had debited almost $200 directly from her account. She had never heard of the company and had no idea why or how they were taking her money.
"When I went to withdraw money it actually said that my account was in the negative, " said Lewis. When she realized Cutter Recovery Services was likely a collection agency, Lewis said, "I went through all my paperwork and couldn't find anything that I could have possibly owed anybody."
"I was shaking. I mean it was so bad that I thought I was going to have a nervous breakdown actually."
Cutter Recovery Services made several attempts to take money from Lewis' account, Lewis says. It turns out the company collects on unpaid debts for the Cash Store. Lewis had given her bank account information when she borrowed money there.
"I was never told (by the Cash Store) that my banking information would be given out to any other company, " said Lewis.
That began weeks of worry and hassle for Lewis. She had to borrow money from relatives to pay the bills. At one point, she didn't have enough money for groceries and Christmas gifts, she says.
She had to take time off work, to go into the bank to try to get the debits stopped. Even after she put in a stop payment, Cutter Recovery Services debited her account one last time, for a higher amount -- taking $500 in all before it stopped, she says.
"I was so upset I had no clue where money was going to come from. I didn't know if I would get it back, " said Lewis.
"They owe money and they don't want to pay it back, " said Jack MacIsaac, owner of Cutter Recovery Services in Edmonton. "So they complain. It's a subculture that exists, " he told CTV.
MacIsaac insists customers sign a debit authorization form when they borrow money at the Cash Store and Cutter has no obligation to inform them if and when their account will be debited.
"Most of them we don't have addresses for them, but we don't have any obligation to give them notice. They didn't give us notice when they got the loan that they weren't going to pay the loan back, " said MacIsaac.
CTV found a dozen similar complaints about Cutter Recovery Services on the internet. They were from Cash Store customers across Canada, claiming their bank accounts were debited without their knowledge or permission.
The Cash Store refused CTV's request for an on camera interview. In a statement, it says attempts are made to contact people before accounts are sent to collection. It also points out, payday loan customers sign a consent form, allowing their personal information to be provided to affiliated "lenders."
CTV obtained a copy of the Cash Store application form for a payday loan that customers sign. It does say information may be shared, but it is not a direct debit authorization form. In fact, it says nothing about debits from bank accounts.
The Canadian Banker's Association acknowledged banks don't actually check for customer authorization when they allow debits from an account. Essentially, Canada's banks trust billers like Cutter Recovery Services to abide by the rules, which require them to have debit authorizations on file.
"The onus is on the biller to follow the rules, " said Caroline Hubberstey of the CBA. "Logistically to look at every agreement that's going through is just not logistically feasible."
Amanda Lewis did finally get her money back from her bank, including several service charges. She says the banks should be more diligent about who gets access to people's accounts.
"They literally told me (at first) there was absolutely nothing I could do about it other than paying for a stop payment which they told me would not guarantee the withdrawals would stop, " she said. "I was extremely angry. I was hurt. I felt let down by the bank, you know, I entrusted my money to the bank."
The message from the CBA is -- watch who you give your banking information to, and be careful what you sign. Your bank won't be watching debits from your account, unless you personally complain.
"This is a very effective system, " said Hubberstey of the CBA. "It's working well. While there are rare occurrences where there are problems then they are dealt with by the individuals involved."
Kathy Tomlinson--CTV News (THU FEB 0206 on CTV news, 11pm)