June 10, 2009
-
News: Canada Banks Lose CC Fee Lawsuit
Nine Canadian financial institutions were ordered by a Quebec Superior Court Judge to pay back over $200 million in credit card fees determined to be illegally collected. Justice Clement Gascon presided over the suit and handed down the decision saying that the banks' actions were a violation of the Quebec's Consumer Protection Law. The action in question involved banks charging a fee for foreign currency conversion from 2000 through 2007 on customers' Visa, MasterCard, and American Express credit card transactions. Justice Gascon's ruling sets a precedent in Canadian financial law and settles three class action suits filed by credit card consumers. Banks included in the lawsuit were the Royal Bank of Canada, Toronto Dominion Bank, Bank of Montreal, Canadian Imperial Bank of Commerce, Scotiabank, Desjardins Group, Laurentian Bank of Canada, Citibank Canada, Amex Bank and the National Bank of Canada.
Consumers complained that the fees were not administrative or service charges, and in actuality amounted to interest charges. Many said that they paid their credit card bill within the grace period and should not have been charged the fee as stipulated by Quebec Consumer Protection Act. However, attorneys for the banks claim the fees were service charges and not interest charges. Justice Gascon did not agree. Further, the banks' attorneys said that the banks operate under Federal law and therefore should not be subject to Quebec law. Lawyers for the cardholders also argued that banks did not provide proper disclosure to credit card customers on the procedures and practices of converting foreign currency transactions. This too, said Justice Gascon "violated the act" and will cost American Express alone $2.5 million.
Justice Gascon ruled that the credit card customers receive a cash award of up to 2.5% on charges of foreign exchange into Canadian dollar on merchant and internet purchases conducted during the specified dates. Gascon commented that some time might lapse before consumers see their award in light of a possible appeal. The Justice also ordered all parties to meet within 30 days to work out all the details of the settlement. Canadian bankers say their attorneys will be reviewing the decision and determining if they will be filing an appeal.